“Why should anyone care about valuation? It is not fair to compare ourselves with other peers, we are very big,” said MR Kumar, Chairman of Life Insurance Corporation of India. Responding to questions about timing, he also emphasized that LIC did not do an IPO during the Covid-19 pandemic.
Ahead of his initial public offering which opens on May 4, Kumar spoke with Line of business on post-listing plans, noting that the Corporation’s profile would not change, but its way of doing some things could change. Edited excerpts:
How do you see LIC’s profile improving after the IPO? What is your vision after that?
It is a new phase. LIC has gone through many phases. The first phase was the nationalization, the second phase was the opening of the market and the third is the listing. Listing brings more responsibility in terms of connecting with shareholders and creating shareholder value. The Corporation is prepared for that. We have been very competitive in the market. We know there are other players on the roster and we’ve been watching them.
The LIC profile won’t change much, but the way we do some things might change. We may adjust marketing activity; we could try to get more into bancassurance. The agency channel still controls more than 96 percent. We can improve the volumes of the bancassurance channel. With 60,000, we have the largest number of bank branches. That can really work. We want to totally reformulate our digital marketing. We have already partnered with Policybazaar and will be expanding it. More than one or two products initially will be sold through PB and directly, and maybe through the portal once we have it ready.
In terms of investments, we are a well-known investor. We have a high market value and we have considerable capital. Our strategy has always been to buy and hold, looking after the long-term interests of policyholders. We don’t want to change that. When we have products, more than ULIP, where CAGR or NAV is important, we can modify that part where necessary.
Does investor demand look very strong despite concerns about the Ukraine crisis?
I see very strong demand from both anchors and retail investors. The insured reserve is there with a good discount of more than 6 percent, I’m sure they will come in big. We have been seeing the growth of Demat accounts, which has accelerated quite a bit, even after February and March. We believe that there are new investors entering the market who are interested in taking action with the LIC IPO. There will be a lot of interest.
What is your opinion on the concerns about the LIC valuation?
Why should anyone care about valuation? It is not fair to compare ourselves with peers; we are very big So, in terms of PE multiple, we need to look for similarly located insurance companies, perhaps somewhere in China. We compare favorably in terms of PE multiple. That’s the way we wanted to go. The government also felt that we should reward first-time policyholders and shareholders.
Is volatility in domestic stock markets a concern?
If you look at the slightly long-term outlook, then from March onwards, it has recovered. It has been going up and down in recent days, but has generally recovered since March. It will stabilize very soon. The war will have some impact. We are not in a silo, but we are able to manage our markets despite much of the excess of war.
There have been many questions about the timing of the IPO?
There is no such thing as timing the market. Timing the market is more important than timing the market. Any time is a good time. When there was a serious problem like Covid, we never did it. The Ministry of Finance had announced it in the 2020 Budget. We had some preparations to make and it was not a good time with the pandemic, and then the war came. Now I think things have calmed down. Looking ahead, any time is a good time. Having done all the work, we didn’t want to delay it any longer. It makes sense to take it out now.
After the list, will the LIC continue to intervene to help the government?
Our position on this has been very clear and consistent. Although the government wants it, we are the ones who will answer the call. Our investment committee sees if it’s a good thing or not. Some investments have gone south, but many PSU stocks that we have invested in are paying good dividends. We’re buy-and-hold, so we’re not really worried. Ultimately, its value will accumulate over a period of time. We are prepared to wait for it. Now that we have a board of good independent directors, there will be more diligence on whether stocks are worth investing in. That will only get stronger in the future.
What is happening with the IDBI Bank and LIC Housing Finance (LIC HF) issue?
The government and LIC are trying to sell shares in IDBI Bank. We would like to continue the association and make it a small property, if not a major property. If that happens quickly, then the problem between LIC HF and IDBI Bank will cease to exist. If not, we will have to find a solution. One way could be to ask IDBI to obtain loans for LIC HF in the same way that HDFC and HDFC Bank operated. It is a question of what happens first; we’ll wait and watch and then we’ll take a call.
How is LIC preparing for the job listing stage?
We have had strategic meetings with all the top executives. Post the list, we’re meeting with all the senior division managers, zone managers… they know what needs to be done, but the meeting will put things in perspective and provide a road map to all of our divisions and branches on what It should be done this year and quarter by quarter, since we will have quarterly results. The stock market reacts to that. We will also have analyst meetings from the second and third quarters onwards. That is something to which we sensitize them.
Any message for LIC employees who are worried about contributing?
LIC is already public. It’s just that the shares weren’t trading. The amended LIC Act says that we are not a company; we are a corporation. We will take care of the interests of the employees. They have nothing to worry about. By now, they know.