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The maximum bid amount under the policyholder reservation portion will be Rs 2 lakh net of policyholder discount
The state-owned life insurance behemoth, Life Insurance Corporation of India (LIC), has filed a Draft Red Herring prospectus (DHRP) for the country’s largest initial public offer (IPO). The company has reserved 10% of the offer size of around 31.62 crore shares for its policyholders and plans to give a discount to them on the offer price. As on September 30, 2021 there are 28.3 crore individual policies being serviced in India by LIC.
Bidding process for policyholders
LIC policyholders having one or more policies as on the date of the DRHP and bid/offer opening date and are residents of India would be eligible to apply under the ‘policyholder reservation portion’ category. They will have to ensure that PAN details are updated in the policy records of the company by February 28. A policyholder can apply only from his own demat account. In fact, NRI policyholders or other policyholders residing outside India cannot apply for this offer in this category.
Eligible policyholders can apply under the policyholder reservation portion at the cut-off price net of policyholder discount, multiplied by the number of equity shares bid for by the eligible policyholder. All policies which have not exited the records of LIC by way of maturity, surrender or death of the policyholder are eligible for reservation under this category.
The maximum bid amount under this category will be Rs 2 lakh net of policyholder discount. Only those bids, which are received at the cut-off price or above the offer price, net of policyholder discount will be considered for allocation under this portion.
Bid through ABSA
Policyholders can bid through the Applications Supported by Blocked Amount (ABSA) including the UPI mechanism. The full bid amount will be blocked by the Self Certified Syndicate Banks (SCSBs) in the bank account of the ASBA bidder, or by the sponsor banks through the UPI mechanism, specified in the ASBA form at the time of submission. Policyholders bidding at a price within the price band can make payment based on the bid amount, at the time of making a bid.
Policyholders using the UPI mechanism will have to submit their ASBA forms with syndicate members, registered brokers, registrar and transfer agents or depository participants. Also, all ASBA bidders will have to ensure that the ASBA account has sufficient credit balance.
Moreover, eligible employees bidding in the ‘Employee Reservation Portion’ can bid under the open offer and the Policyholder Reservation Portion, subject to the eligibility criteria and applicable limits, and such bids will not be treated as multiple bids. An eligible policyholder bidding in the Policyholder Reservation Portion can also bid under the open offer.
Allotment of shares to policyholders
The basis of allotment in this category will be proportionate, provided the value of allocation to an eligible policyholder does not exceed Rs 2lakh net of policyholder discount. As the allotment of equity shares will be made only in dematerialised mode there is no need to make a separate nomination with LIC.
Nominations registered with respective depository participants of the bidder would prevail and if the bidders want to change their nomination, they have to inform their respective depository participant.
In case of a joint policy, only one of the two holders can apply for the shares under the Policyholder Reservation Portion category. The PAN number of the applicant bidding in the offer needs to be updated in the policy records. The applicant has to have a demat account in his name and in case the demat account is joint, the applicant needs to be the first /primary holder of the demat account. Unlike anchor investors, there is no lock-in period for policyholders and they can sell the shares at any point of time after the listing at the BSE and NSE.
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