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LIC IPO: Shares trade at premium in grey market; Subscribe for listing gains or long-term dividend?

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LIC IPO News Updates: Life Insurance Corp of India has fixed a price band of Rs 902-949 a share of face value of Rs 10 each, for its upcoming Rs 21,000-crore IPO, which opens on 4 May. The IPO size finalised at 3.5% of the company equity is lower than the 5 per cent mentioned by LIC in its draft red herring prospectus (DRHP) filed with the capital market regulator SEBI in February this year.

In the grey market on Wednesday, LIC shares were seen trading with premium at Rs 969 apiece, up Rs 20 or 2 per cent from the upper end of IPO price, according to the people who deal in unlisted shares of the companies. As the penetration of the insurance product in India is still very low, Malviya expects this to increase very rapidly in the coming time. “We believe that investors can subscribe to the IPO and can expect a healthy return in the times to come,” he said.

There is a fair degree of interest in the LIC IPO from retail investors, B Gopkumar, MD & CEO, Axis Securities, told .com. “We opened around 45,000 accounts for the IPO alone last month. Of these, 40% of customers are new to the market,” he added. Gopkumar said that even as near-term market volatility is likely to weigh on the stock performance, the stock looks positive from the long-term perspective.

LIC IPO: Should you subscribe?

Gopkumar from Axis Securities has advised investors to subscribe to the LIC IPO for the long term, as he is confident that the structural story for the life insurance industry remains intact as uncertainties during the pandemic have highlighted the benefits of life insurance. LIC valuation has been set at 1.1 times its embedded value of Rs 5.4 lakh crore arrived at by Milliman Advisors.

The LIC IPO, which was previously scheduled for March 2022, got postponed due to market volatility caused by geopolitical tensions such as the Ukraine-Russia war. “Given the strong brand connect that LIC enjoys coupled with its leadership position and high industry growth prospects, we believe the IPO would receive decent traction,” Ajit Mishra, VP — Research, Religare Broking, told .com.

One can now invest in India’s largest and global’s third strongest brand Life Insurance Corporation (LIC), in addition to being just a policyholder, as the state-owned insurance behemoth is preparing to go public. The Life Insurance Corporation of India is fully owned and controlled by the Government of India. “After diluting stake by the government of India its remaining major shareholder in the company and investors can expect a healthy dividend from the company after it gets listed,” Narendra Solanki, Head- Equity Research (Fundamental), Anand Rathi Shares & Stock Brokers, told .com. Solanki also added that the insurer has the highest commission-to-premium ratio of 5.5 per cent, compared to the top five private players’ median of 4.4 per cent.

LIC IPO price band on higher side, but subscribe for listing gains

Even as the ongoing stock market volatility due to the Russia-Ukraine war forced the government to cut the issue size to 3.5 per cent, the price band has been kept at higher side which is not an attractive price for adequate return growth, Ravi Singh, VP & Head of Research, Share India Securities, told .com. “We recommend that investors may subscribe for listing day gains and wait for lower levels for long term investment,” Singh added.

The stock recommendations in this story are by the respective research analysts and brokerage firms. TheSpuzz Online does not bear any responsibility for their investment advice. Capital markets investments are subject to rules and regulations. Please consult your investment advisor before investing.

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