LIC will likely be open for anchor traders tomorrow for bidding. Whereas the IPO will likely be out there publicly for subscription on BSE and NSE from 4th Might to ninth Might.
The IPO is solely a proposal on the market (OFS) the place the federal government will carry its strategic sale of three.5% within the insurer. The whole variety of shares supplied within the IPO is 22.10 crore fairness shares.
The federal government seeks to lift about ₹20,557 crore from the IPO. The worth band is ₹902 – 949 per fairness share.
Beneath the IPO, 50% is reserved for certified institutional consumers (QIB), 35% of the portion is stored for non-institutional traders (NII), and the remaining 15% is about for retail particular person traders (RII). Additionally, 10% is proposed for policyholders. Nonetheless, policyholders who’ve their up to date PAN hyperlink with their LIC insurance policies and maintain a Demat account are eligible for subscribing to the IPO.
Though LIC won’t obtain any proceeds from this provide, the prime goal of the difficulty is to attain the advantages of itemizing shares on inventory exchanges.
This government-owned insurer absolutely holds fairly a big management within the insurance coverage business. With greater than six many years of expertise, LIC is the biggest insurer in India with a market share of 61.6% by way of premium and a share of 61.4% e by way of New Enterprise Premium.
Not simply that, LIC holds dominance with 71.8% market share by way of the variety of particular person insurance policies issued, and an 88.8% market share by way of the variety of group insurance policies issued for the 9 months ended December 31, 2021.
Nonetheless, there are specific dangers within the IPO as effectively that can’t be ignored.
LIC will compete towards different personal gamers specifically SBI Life Insurance coverage, HDFC Life Insurance coverage, and ICICI Prudential Life Insurance coverage on inventory markets.
In keeping with Geojit, LIC’s internet premium is round ₹4,05,398 crore multi-fold instances greater than friends SBI Life whose internet premium is at ₹49,768 crore, HDFC Life at ₹38,122 crore, ICICI Prudential at ₹34,973 crore.
Nonetheless, Geojit additionally highlights that compared to friends LIC’s earnings per share are decrease at ₹4.7 per share versus SBI Life whose EPS is at ₹14.6 per share, HDFC Life and ICICI Prudential maintain EPS of ₹6.7 per share every. Notably, LIC’s worth of a brand new enterprise (VoNB) is decrease at 9.9% versus 20.4% of SBI Life, 26.1% of HDFC Life, and 25.1% of ICICI Prudential.
Then again, Return on Fairness (RoE) is greater at 43% versus SBI Life at 14.4%, HDFC Life at 16.1%, and ICICI Prudential at 11.3%.
Analysts at Geojit of their analysis notes identified key dangers for LIC. They said that LIC is dealing with excessive competitors from personal insurance coverage gamers, particularly within the city areas. Additional, decrease short-term persistency metrics additionally is among the dangers.
Among the many key dangers, Kajal Gandhi, Vishal Narnolia, and Sameer Sawant, Analysis Analysts at ICICI Securities highlighted that adversarial variation in persistency metrics might have a fabric adversarial impact on LIC’s monetary situation. Additional, rate of interest fluctuations and volatility in capital markets might adversely have an effect on profitability.
Additionally, there may be vital technical complexity concerned in embedded worth calculations and the estimates used within the embedded worth stories might fluctuate materially if key assumptions are modified, as per the ICICI Securities.
Must you subscribe?
Nearly all of the analysts have beneficial a ‘Subscribe’ to the LIC IPO due to its sturdy market presence.
Geojit analysts of their word mentioned, “On the higher value band of Rs.949, LIC is offered at P/EVPS (Embedded Worth Per Share) of 1.1x which is at a reduction of 65% in comparison with the common valuation of personal life insurance coverage gamers. Regardless that headwinds like declining market share, decrease short-term persistency ratios, and sub-par margins demand a reduction to personal gamers, the present valuation is enticing contemplating its sturdy market presence, enchancment in profitability attributable to adjustments in surplus distribution norms, and robust sector progress outlook. Therefore, we assign a “Subscribe” score on a brief to medium time period foundation.”
LIC’s market valuation stands greater than ₹6 lakh crore, as per Geojit report.
Supply: Live Mint