LIC IPO: This week will mark the beginning of the much-awaited Life Insurance Corporation of India (LIC) IPO (Initial Public Offering). The LIC IPO will open for investors to bid on later this week on May 4 and close on May 9. Investors will be allowed to bid for the public issue in the fixed price band of Rs 902-949 per share, which translates to Rs 21,008 crore on the upper end of the price band, however, LIC has offered various discounts to investors, which makes the net issue size to Rs 20,558 crore. The public issue of LIC will be the biggest ever witnessed by Dalal Street. Just ahead of the LIC IPO opening, the timing for the IPO market has been increased from 10 AM till 7 PM for all the days.
The IPO is entirely an offer for sale (OFS) by the government of India, where 22.1 crore shares have been offered to investors. 50% of the issue is reserved for qualified institutional buyers while 35% of the issue has been kept for retail investors. 50% of the entire issue is for non-institutional investors. Investors can bid for the LIC IPO in a lot of 15 equity shares and multiples thereafter. Retail category investors will get a Rs 45 per share discount in the LIC IPO and so will LIC Employees. Meanwhile, LIC Policyholders will get a Rs 60 per share discount.
Geojit Financial Services: Subscribe
“At the upper price band of Rs.949, LIC is available at P/EVPS (Embedded Value Per Share) of 1.1x which is at a discount of 65% compared to the average valuation of private life insurance players,” analysts at Geojit Financial Services said. Analysts added that the current valuation is attractive considering its strong market presence, improvement in profitability due to changes in surplus distribution norms and strong sector growth outlook. High competition from private insurance players and lower short term persistence metrics are some of the concerns surrounding the LIC IPO.
ICICI Direct: Unrated
LIC is a market leader in the Indian life insurance industry with a strong distribution network and diversified product suite, said analysts at ICICI Direct. “Embedded value for LIC as of September 30, 2021 was at Rs 5.396 lakh crore. At the upper end of the price band, the company is valued at ~1.1x EV as on September 30, 2021,” they added while assigning the ‘Unrated’ rating. The government of India is offloading 3.5% stake in the insurance company, bringing the post-issue promoter shareholding to 96.5% from the current 100%.
Nirmal Bang: Subscribe
LIC is an insurance behemoth, the largest life insurance company in India and the sole public sector player. The company enjoys a market share of 64% (in terms of premium) and has AUM of Rs 396tn, >3.3x of all private players combined, Nirmal Bang said. “At the upper-price band of Rs949, the issue is valued at 1.1x EV (Sep ‘21) which is at a significant discount to private sector valuations,” analysts added.
Analysts at Nirmal Bang, at the end of December last year, individual business accounted for 70% of the total APE compared to 70.8% as of FY21 and 73.6% as of FY20. A Subscribe rating has been assigned to the IPO.
Ventura Securities: Subscribe
Ventura Securities too has a Subscribe rating on the LIC IPO. “LIC is a part insurance and part investment products company. Their plans are a combination of insurance and investment with a guaranteed return,” they said. On successful completion of its IPO, LIC would join peers such as SBI Life Insurance Company, HDFC Life Insurance Company, and ICICI Prudential Life Insurance Company.