LIC IPO: The Rs 20,557 crore initial public offering (IPO) by Life Insurance Corporation (LIC) will kick off for subscription today. The company will be selling its shares in the range of Rs 902-949 per equity share, with a minimum bid of 15 shares and then in multiples thereafter till May 9. Ahead of the IPO, the public sector insurance behemoth has raised Rs 5,627 crore from anchor investors, allotting around 59.3 million shares to 123 investors at Rs 949 per share.
While LIC policyholders are entitled to Rs 60 discount over the issue price, the retail investors will be offered the issue at a discount of Rs 45 per equity share. The minimum bid lot is 15 shares and in multiples of 15 equity shares thereafter.
LIC IPO: GMP Today
LIC IPO has commanded a 9 per cent premium over its upper price band in the grey market as the Rs 21,000-crore issue opens for subscription today. In fact, the traded grey market premium has increased from 5 percent, quoted last week.
As per the data by IPO Watch and IPO Wala, LIC traded at a premium of Rs 85 per share in the grey market on Wednesday, against Rs 45 premium last Thursday. This means, at the upper end of the price band, LIC shares are trading at Rs 1,034 (Rs 949 + Rs 85), as LIC IPO GMP today is Rs 85, which is around 9 per cent over the issue price.
LIC enjoys a strong market share of 61.6 per cent based on total premium and 61.4 per cent based on new business premium in the first nine months of FY22. Its asset under management (AUM) of Rs 40 lakh crore is 3.2 times of all private players combined and 16.2 times the second-largest player’s assets.
Geojit Financial Services noted that LIC’s market share (based on premium) in group business declined to 74 per cent in Q3FY22 from 81 per cent in FY16, while in individual business, it declined to 43 per cent from 56 per cent during the same period. Due to a higher mix of non-linked and participating (par) policies, LIC also has a lower margin of 9.9 per cent as on FY21 compared to private players in a range of 20-25 per cent, it noted.
“At the upper price band of Rs 949, LIC is available at P/EVPS (embedded value per share) of 1.1 times which is at a discount of 65 per cent compared to the average valuation of private life insurance players,” it said while assigning a “Subscribe” rating on the issue from a short to medium term basis.
Its peers HDFC Life Insurance is trading at a price to embedded Value of 4.1 times, SBI Life at 2.9 times while ICICI Prudential Life trades at 2.2 times EV.
Par products account for over 92 per cent of LIC’s total business. But LIC has stated that it would be focusing strongly on the non-par segment, particularly on term life protection.
Angel One said that “Valuations factor in most of the negatives. 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. Hence, we are assigning a subscribe recommendation.”
Anand Rathi finds the issue attractive for 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 IP,” it said.
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