LIC IPO Opens On May 4, 2022: Should You Subscribe?

LIC- the country's largest public insurer company will launch the country's largest ever public issue (IPO) on Wednesday. The issue will remain open for subscription until May 9, 2022. Based on the market conditions, the behemoth decided to trim the stake sale by the government to just 3.5% as against 5% earlier and expects to mop up Rs. 21000 crore. The price band for the issue is Rs. 902-949 per share.

As per the stock exchange filing, the anchor investor portion of the LIC IPO has been completely subscribed. Further as per the disclosure, over 71% of the anchor book portion came from domestic mutual funds.

Brokerage and experts views on LIC IPO:

"It will be a case of massive subscribe at the current price and it would be good buy for investors," Manish Sonthalia, associate director and fund manager at Motilal Oswal Asset Management Company is quoted as saying in a leading business portal news.

 

KR Choksey views: Subscribe for both listing and long term gains

The brokerage is of the view that LIC has emerged as a consistent player in the insurance segment with steady margins and has also quickly streamlined with its product portfolio and distribution mix and is hence good to grab the opportunity going ahead. "The protection segment is the next key trigger for growth for life insurers, where LIC's contribution is lower as compared to its peers. We believe, with increased focus on this segment, LIC is well poised to capture the industry opportunity," a report from KR Choksey said.

"We believe valuation for LIC is reasonable, keeping in mind the valuations at which the peers are trading and the industry average," the report from KR Choksey added. The discount in the multiple for LIC could be because of current dependence on traditional product segments, lower VNB margins, higher employee expenses, and agency distribution mix, compared to its private peers.

"Given the growth prospects for the pension/ annuity segment and the company's position as the market leader in the insurance sector, the company's valuation will be at par with private peers," the brokerage said in its report. Further holding a positive view on the IPO it recommends investors to subscribe to the IPO for listing as well as long-term gains.

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At the upper price levels, LIC's embedded value with a market cap of Rs 6,00,200 crore is quite lower when compared with the three listed peers like HDFC Life Insurance, SBI Life Insurance and ICICI Prudential Life Insurance where the average embedded value stood at Rs 3,10,500 crore and the average market capitalisation-to-embedded value ratio arrived at 3.4 times. Hence, the issue looks quite attractive to investors.

Angel One: Subscribe

The highly research backed brokerage is of the view that most of the negatives with the LIC IPO have been factored in the valuation. Further "expected improvements in product mix and greater transfer of surplus to shareholders account over the coming years are expected to drive profits from current low levels, which along with cheap valuations provide comfort. Moreover, the discount of Rs 45 and Rs 60 for retail investors and LIC policyholders makes the issue more attractive for them", adds the brokerage.