InvestorQ : Is it true that investors are asking for a larger distribution of LIC surplus as dividends ahead of the IPO?
sarah Leo made post

Is it true that investors are asking for a larger distribution of LIC surplus as dividends ahead of the IPO?

Answer
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vidhya Laxmi answered.
7 months ago


That is possible and could be a slightly sticky affair for the government and for the investors that come in. This is covered by Section 28 of the LIC Act. Currently, Section 28 of the LIC Act stipulates that the insurer shall distribute 5% of its surplus each year to the government as dividend. However, most private insurers give away up to 10% to the shareholders and only retain the balance for the policyholders. Any change to this ratio will require Section 28 of the LIC Act to be amended and will require approval of both the houses. Private investors may insist on amendment to this Section before even committing to invest in the LIC IPO; as it impacts their returns. Government may still want to retain control over the corpus by limiting dividends.