InvestorQ : Is it true that the NPAs of LIC has gone up sharply in the last one year? What does that imply for the IPO?
Arusha Ray made post

Is it true that the NPAs of LIC has gone up sharply in the last one year? What does that imply for the IPO?

Answer
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Dhwani Mehta answered.
1 month ago


Gross NPAs of the debt portfolio of LIC are at a life-time high of 8.17%. This has gone up by nearly 200 bps in the last couple of years. This has surely become significant ahead of the forthcoming IPO of the insurer. Interestingly, some of the top private insurers had reported zero gross NPAs on their debt portfolio.

However, LIC makes it a point to write off most of the MTM losses on an annual basis and hence its net NPAs stand at just 0.79%, but that still does not take away from the fact that the NPA levels are huge. LIC has been consistently of the view that the gross NPA of LIC should not be seen in the context of its debt portfolio but its overall portfolio.

During the last fiscal year, LIC wrote its investments in the bonds of IFCI, Yes bank, Dewan and Indiabulls Housing to the tune of nearly Rs.5800 crore. LIC has a solvency ratio of 1.55 as compared to the statutory requirement of 1.50, which is just about meeting the bar. This could be an important metrics while evaluating the valuation of LIC in its IPO.