LIC IPO: The Initial Public Offering (IPO) of Life Insurance Corporation of India opened for subscription yesterday and it will remain open for subscription till May 9, 2022, 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 government will be selling at 3.5 per cent stake entirely through an offer for sale (OFS). Of which 10 per cent of the shares are reserved for LIC policyholders and 0.7 per cent for LIC employees. Also, 31.25 per cent is reserved for household (retail) investors. 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.
Also Read: LIC IPO Opens Today: India’s Biggest Public Issue Live Now, Here’s How to Buy LIC IPO Shares
LIC IPO Subscription Status
The LIC IPO got a 67 per cent subscription on day 1 of the opening of the offer, with strong demand coming from the policyholders, employees and retail investors. LIC policyholders led the bout as they lapped up twice (1.99 times) their portion of the offer. The portion allocated to the employees also got fully subscribed (1.17 times) on day one itself while the retail investors closed on 60 per cent of their allocated portion.
The portion set aside for non-institutional investors was subscribed 0.27 times while qualified institutional buyers lapped up 33 per cent of their allocated portion on day 1. A total of 10,86,45,360 shares received the bids as against the offered 16.20, 78,067 equity shares (excluding shares offered to anchor investors), by 7:00 pm on the stock exchanges.
LIC IPO: Price Band
The company has fixed a price band of Rs 902-949 for the public issue, which will close on May 9. At the upper price band, the insurer will have an estimated market capitalization of Rs 6 lakh crore.
Also Read: LIC IPO Subscription Opens Today: GMP, Financials, Review; Should You Apply?
LIC IPO: Lot size
Investors can bid for a minimum of 15 equity shares (1 lot) and in multiples thereafter.
LIC IPO: GMP Today
LIC IPO has commanded a 9 per cent premium over its upper price band in the gray market as the Rs 21,000-crore issue opens for subscription today. In fact, the traded gray 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 gray 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.
The company offers participating insurance products and non-participating products like unit-linked insurance products, saving insurance products, term insurance products, health insurance, and annuity and pension products. As of December 31, 2021, LIC had a total asset under management of Rs 40.1 lakh crore on a standalone basis.
LIC IPO: Should you subscribe?
The brokerages have given a thumbs-up to the IPO recommending investors to ‘subscribe’ to the issue.
Brokerage firm LKP Securities 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 LICs 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 LICs 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: Rs6 trillion/Rs5.39 trillion), which is at a significant discount to its listed peers. Currently listed insurance companies trade at Market capitalization/EV multiple of ~2.8x. LIC has a marquee anchor list of investors and we recommend SUBSCRIBE to the LIC IPO,” the IPO note said.
Yesha Shah, Head of Equity Research, Samco Securities, said: “From a valuation standpoint, at the upper band of the issue price, LIC is priced at 1.1x embedded value, which is at a significant discount to peers. Given the attractive valuation, the downside from here seems limited. Further, the fact that a discount has also been offered to retail investors is the cherry on the cake. Taking into account all these factors, we have a SUBSCRIBE rating on this IPO.”
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