The over Rs 21,000 crore LIC IPO will be available for subscription till Monday, May 9, 2022, and the price band of the company has been fixed at Rs 902-949 per share.
LIC is the country’s oldest and largest life insurance firm. It was formed by merging and nationalizing 245 private life insurance companies on September 1, 1956, with an initial capital of Rs 5 crore. LIC now manages around Rs 40 lakh crore assets and is the fifth-largest life insurer globally and the largest asset manager in the country.
As of December 31, 2021, it covered 91 per cent of all districts and had 1.33 million individual agents, and had a market share of 61.6 per cent in terms of premiums or GWP, 61.4 per cent in terms of New Business Premium, 71.8 per cent in terms of number of individual policies issued, and 88.8 per cent in terms of number of group policies.
It is owned by the central government which will sell 22.13 crore (22,13,74,920) shares or 3.5 per cent of its stake in LIC through the public offering. The IPO is entirely an offer-for-sale (OFS) and the government plans on raising over Rs 21,000 crore through the sale.
The size of the IPO was cut from Rs 65,000 crore to Rs 21,000 crore as the Russian invasion of Ukraine and sustained selling by foreign portfolio investors (a net of Rs 1,48,078 crore since the beginning of December 2021) affected the stock markets. Despite this, LIC IPO will be the largest public offering in the country surpassing last year’s Paytm IPO which garnered Rs 18,300 crore.
During the announcement of the IPO last week, the company announced a discount of Rs 60 per share for its policyholders and Rs 45 apiece for retail investors and LIC employees.
Half of the issue size has been reserved for qualified institutional buyers (QIBs), 35 per cent for retail investors and the remaining 15 per cent for non-institutional investors.
Investors who wish to subscribe to LIC IPO can bid in a lot of 15 equity shares and multiples thereafter. At the upper price band, they will be shelling out Rs 14,235 (excluding discounts) to get a single lot of LIC. The shares will be listed on both BSE as well as the National Stock Exchange (NSE).
The applicants also must note that the cut-off time for UPI mandate confirmation is Tuesday, May 10, 2021, up to 12:00 pm. If they fail to do so then their application may not be considered.
Kotak Mahindra Capital Company, Axis Capital, BofA Securities India, Citigroup Global Markets India, Nomura Financial Advisory and Securities India, Goldman Sachs India Securities, ICICI Securities, JM Financial, JP Morgan India and SBI Capital Markets are the book running lead managers to the offer while KFin Technologies is the register of the issue.
Before heading into the IPO, the anchor portion will open for subscription today, May 2, 2022.
The research teams at Geojit Financial Services, Anand Rathi Share and Stock Brokers and Reliance Securities in their respective IPO notes have recommended a “Subscribe” to the offer.
Geojit Research in its report noted “At the upper price band of Rs 949, LIC is available at P/EVPS (Embedded Value Per Share) of 1.1x which is at a discount of 65 per cent compared to the average valuation of private life insurance players. Even though headwinds like declining market share, lower short-term persistence ratios and sub-par margins demand a discount to private players, the current valuation is attractive considering its strong market presence, improvement in profitability due to changes in surplus distribution norms and strong sector growth outlook. Hence, we assign a “Subscribe” rating on a short to medium term basis.”
Reliance Securities in its IPO report said, “Despite LIC writing millions of insurance policies, the insurance premium-to-GDP ratio in India is at 3.7 per cent, well below the global average of 7.2 per cent. The IPO is valued at a Price/Embedded Value of 1.1x on the higher band on its 2QFY22 EV, which is at a significant discount compared to the P/EV for listed private life insurance companies. HDFC Life Insurance is trading at a P/EV of 4.1x, SBI Life at 2.9x, and ICICI Pru Life at 2.2x. LIC has a diverse portfolio of insurance and investment products to cater to the needs of individuals. The company is well-placed owing to its omni-channel distribution network comprising of 1.33mn agents, several partners and alternate channels, its trusted “LIC” brand value, and 65 years of lineage. Moreover, LIC is backed by its strong financial track record and experienced management team. In view of the giant market share, largest assets under management, strong brand, diverse portfolio of products, and valuation comfort, we recommend SUBSCRIBE to the issue.”
The share allotment is likely to take place on Thursday, May 12, 2022, and the shares are expected to be listed on Tuesday, May 17, 2022, according to the timeline given in the red herring prospectus (RHP).