LIC IPO Subscription: The LIC IPO, which kicked off on Wednesday, will remain open until May 9, including on Saturday, a notification on the National Stock Exchange of India Ltd. said. The LIC IPO would remain open on Saturday (May 7) between 10 am and 7 pm. This unusual move comes at a time when the government is looking to attract investors including retail buyers for the nation’s biggest share sale.
The IPO anchor book of 59.2 million shares closed on May 2 with 42.1 million units kept for domestic mutual funds. Around 99 mutual funds invested Rs 4,001 crore, buying shares at the upper end of the IPO price band of Rs 902-949 apiece. Foreign portfolio investors (FPIs), pension funds, corporates and other insurers also participated in the anchor investment.
LIC has reserved 10 per cent of the issue for policyholders and five per cent for employees. The IPO will have Rs 60 per share discount for policyholders. The firm has reserved up to 35 per cent of the IPO for retail investors.
The mega LIC IPO opened for subscription for retail and institutional investors on Wednesday. The government hopes to raise Rs 21,000 crore from the issue. The offer consists of 22.13 crore shares of which 5.92 crore shares have been allocated to anchor investors for Rs 5,627 crore. The price band is fixed at Rs 902-949 per equity share. A discount of Rs 45 per share to retail and eligible employee categories and Rs 60 per share to policy holder category is also being offered.
LKP Research said that “India’s life insurance industry is expected to grow rapidly, owing to a relatively underpenetrated market and expanding awareness, which presents a multi-year growth opportunity. LIC has been providing life insurance in India for over 65 years and is the country’s biggest life insurer, with a significant brand value advantage. There are concerns about losing market share to private players and having lower profitability and revenue growth when compared to private players.”
“However, we believe that LIC’s distribution advantage, increasing sales mix of direct and corporate channels, and a gradual shift to high margin Non- participating products could be possible drivers for LIC’s future growth, negating lower than industry growth rates. At the upper price band, the stock is priced at 1.1x of its 2QFY22 Indian Embedded value (Market capitalization/Embedded value: ₹6 trillion/₹5.39 trillion), which is at a significant discount to its listed peers. Currently listed insurance companies trade at a market capitalization/EV multiple of ~2.8x. LIC has a marquee anchor list of investors and we recommend SUBSCRIBE to the LIC IPO,” the brokerage firm said.
Anand Rathi Research in its IPO note said that “At the upper price levels, the LIC has valued the IPO at 1.11 times its embedded value with a market cap of Rs.6,002 billion which we believe is quite lower when we compared with the three listed peer like HDFC Life Insurance Co, SBI Life Insurance Co. and ICICI Prudential Life Insurance Co. where the average embedded value stood at Rs 3,105 billion and the average market capitalization-to-embedded value ratio arrived at 3.4 times. Hence, the issue looks quite attractive to investors. Considering the largest size of the IPO Company’s well-diversified product portfolio, and financial track records, and bright prospects ahead, we recommend a “Subscribe” rating to this IPO.”
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