LIC IPO: Life Insurance Corporation of India (LIC) IPO, the biggest in the history of the Indian capital market is open for subscription today. The government of India is aiming to garner Rs 21,000 crore at the upper end of the price band by liquidating 3.5 per cent of its stake in the insurance behemoth. Of these, LIC mopped up Rs 5,630 crore from anchor investors on May 2 diluting about 59.3 million shares to 123 investors at Rs 949 apiece. Marquee investors, domestic mutual fund companies, domestic insurance companies, corporates and NPS were part of the anchor allotment.
LIC IPO kicked off on Wednesday or May 4 and will remain open till May 9, including Saturday or May 7 and Sunday or May 8. The price band for the LIC IPO has been fixed at Rs 902-949 per equity share of face value Rs 10 each. LIC policyholders are eligible for a discount of Rs 60. A discount of Rs 45 will also be offered to retail investors and employees.
LIC IPO: Subscription Status Day 2
The initial public offering of the country’s largest life insurance company Life Insurance Corporation of India has subscribed 1.03 times, receiving bids for 16.68 crore equity shares against offer size of 16.2 crore equity shares on May 5, the second day of bidding. The portion set aside for policyholders portion has subscribed 3.11 times, staff 2.21 times, and retail investors subscribed 93 per cent, while QIBs bid for 40 per cent shares of their allotted quota and NII lapped up 47 per cent of their portion.
LIC IPO: Key Concerns
Motilal Oswal highlighted risks and concerns of the LIC IPO. They said: “Adverse variation in persistency metrics could have a material effect on LIC’s financial performance. The secondly, change in regulations could adversely impact business.”
It further said LIC is highly dependent on individual agents. If LIC is unable to retain and recruit individual agents on a timely basis and at reasonable cost, there could be a material adverse effect on its operations.
If actual claims experienced and other parameters are different from the assumptions used in pricing its products and setting reserves for its products, it could have a material adverse effect on LIC business, the brokerage firm said.
“A significant proportion of LIC’s total new business premiums are generated by participating products and single premium products, and any significant regulatory changes or market developments that adversely affect sales of such products could have a material adverse effect on its business,” they added.
LIC IPO: GMP
According to market observers, LIC share price has remained steady in grey market today. They said that shares of LIC are available at a premium of Rs 65 in grey market today. As per the market observers, LIC IPO grey market premium (GMP) today is Rs 65, unchanged from yesterday evening grey market premium. According to market observers, key secondary market indices closing around their Wednesday closing levels could be the possible reason for grey market premium of the insurance behemoth remaining steady. However, they said that LIC IPO GMP has come down from around Rs 90 to Rs 65 levels in last three days, which is mainly because of the negative secondary market sentiments. They expected some upside in grey market sentiment once there is trend reversal at Dalal Street trade pattern.
LIC IPO: Should You Subscribe?
Nirmal Bang Institutional Equities, said: “As the share of non-par products increase, we believe there is good room for margin expansion, said Nirmal Bang Institutional Equities. Given the opportunity, India life insurance NBP is expected to grow at 14-16 per cent CAGR over the next decade. In light of LIC’s market positioning and expected product launches, the company is poised to benefit, it said with a subscribe rating.”
“Though there are concerns over LIC regarding market share loss in individual insurance business and historically lower margins, we believe that valuations factor in most of the negatives,” said Angel One.
The under penetration of life insurance in India coupled with favourable demographic tailwinds would drive multi-decadal growth in the life insurance industry registering a CAGR of 14-16 per cent over FY21-32, said Religare Broking.
“LIC stands to benefit given its leadership position, combined with continued focus on diversifying product mix, strengthening its distribution network and leveraging technology to aid growth and achieve operational efficiencies,” it added with a ‘subscribe’ rating to the issue.