IPO to Open Next Week, Should you Invest?

LIC IPO: The Initial Public Offering (IPO) of insurance behemoth Life Insurance Corporation (LIC) of India will open for subscriptions on May 4 and close on May 9, with anchor investment opening on May 2. The price band is set at Rs 902 to Rs 949 per equity share. So, the government will raise about Rs 20,557 crore through the initial public offering, which is short of earlier projections of about Rs 60,000 crore. However, despite the truncated size, it will still be the largest ever IPO in India. LIC has decided to reserve up to 10 per cent of its much-awaited IPO offer size for policyholders.  Policyholders will get a discount of Rs 60 per share, while employees and retail investors will be entitled to a lower discount of Rs 45.

The government was originally slated to offload 5 percent of its stake in the company, but it brought down the stake sale on offer to 3.5 per cent. Yash Gupta-equity research Analyst, Angel One Ltd said, “The issue size of the IPO is Rs 21,000 crore with a valuation of Rs 6,00,000 crore. Earlier it was expected that the valuations will be around Rs 13,00,000 crore but now it will be around Rs 6,00,000 crore and embedded values are around Rs 5,40,000 crore, so the LIC IPO is valued at around 1.1 times of its embedded value. Private players are trading at around valuations of 2-3 times of embedded value. This Rs 6,00,000 crore LIC valuation looks Lucrative.”


However, before making a debut on the D-street, the LIC shares are now available in the grey market and are trading at a premium of Rs 20 in the grey market today.

However, stock market experts suggested investors that GMP is an unofficial data, which is non-regulated. So, those who follow GMP are advised to go through the financials of the company as well because balance sheet of the company will give better picture about the company’s fundamentals.

LIC IPO: Financials

The AUM of LIC jumped about 10 per cent to Rs 37,46,404.47 at the end of the financial year 2021 from Rs 34,14,174.57 crore in the previous year. The net profit of the company jumped to Rs 2,974.14 crore from Rs 2,710.48 crore during the period under review. For the period ended December 31, 2021, LIC had a total AUM of Rs 40,90,786.78 crore and reported a net profit of Rs 1,715.31 crore.

LIC IPO: Should You Subscribe to The IPO?

As uncertainty continues in the equity markets, analysts don’t expect the issue to see a blockbuster response from investors. B Gopkumar, MD & CEO, Axis Securities, said: “While near-term market volatility is likely to weigh on the stock performance, we remain positive from the long-term perspective. Given the under penetration of insurance and improving financialization of savings, we expect LIC to maintain its market leadership position backed by robust business traction.”

This comes as the Ukraine war dynamics have made foreign investors nervous. Now, they see currency risks and anticipate embargoes while considering investing in emerging markets. The US Federal Reserve’s hawkish stance has further made them choose a safe haven. But an impressive response from domestic investors and some foreign investors has made the government go ahead with the IPO.

Analysts believe that it will lead to a fresh wave of investors entering the market. There is a fair degree of interest in the LIC IPO from retail investors. We opened around 45,000 accounts for the IPO alone last month. Of these, 40 per cent of customers are new to the market, said Gopkumar.

Meanwhile, Divam Sharma, Founder of Green Portfolio, thinks that retail investors should invest in the LIC IPO for listing gains. “Policyholders should also subscribe to the IPO considering the discount they are getting on the price band,” Sharma said.

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