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New Delhi: The Rs 20,557 crore initial public offering (IPO) of Life Insurance Corporation of India (LIC) opened for subscription today. The issue is entirely an offer for sale of about 22.13 crore equity shares by the government of India, which owns 100 per cent stake in the insurer, but will offload only 3.5 per cent stake of the company.

The company will sell its shares in the range of Rs 902-949 apiece but has given a discount of Rs 60 per share to its policyholders. Eligible employees and retail bidders will get a discount of Rs 45 per share.

The company has reserved 50 per cent of the net issue for qualified institutional bidders (QIB), where non-institutional bidders (NIIs) will get 15 per cent of the issue. Remaining 35 per cent portion has been allocated to retail bidders.

The largest primary offering of the Indian equity market is open for subscription till Monday. Investors can bid for a minimum of 15 equity shares and then in the multiples thereof.

LIC is the largest insurance provider company in India. It has a market share of above 66.2 per cent in new business premium. The company offers participating insurance products and non-participating products.

Majority of brokerages are bullish on India’s biggest ever initial public offering and have suggested subscribing to the issue. However, a few of them have raised concerns over declining markets and future stake sales by the government.

Life Insurance Corporation of India is valued at Rs 6 lakh crore, which is about 1.12 times its embedded value (EV) of Rs 5.4 lakh crore, which brokerages say is quite reasonable to its listed peers.

Ahead of its IPO, unlisted shares of LIC were commanding a premium of Rs 50-55 in the grey market, hinting towards a mild listing pop for investors. However, the premium in the grey market has dropped from Rs 85-90 earlier.

LIC has garnered over Rs 5,627 crore from the anchor investors by allotting them 5.92 crore shares at Rs 949 per share, the insurer said in a filing to exchanges. Out of them, 4.2 crore shares were allocated to 15 domestic mutual funds.

Some of the prominent names participating in the anchor round include ICICI Prudential Life Insurance, SBI Life Insurance, Kotak Mahindra Life Insurance, PNB Metlife Insurance, SBI Pension Fund and UTI Retirement Solutions Pension Fund Scheme.

Foreign participation included Government of Singapore, Monetary Authority of Singapore, Government Pension Fund Global and BNP Investment LLP.

Shares of the company will be listed on both the NSE and BSE, tentatively on May 17.

Let us have a detailed look at what top brokerages have to say about LIC IPO:


Reliance Securities
The IPO is valued at a significant discount compared to listed private life insurance companies. It has a diverse portfolio of insurance and investment products for individuals, said Reliance Securities with a subscribe rating.

Nirmal Bang Institutional Equities
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.

Angel Broking
“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.

ICICI Direct
ICICIDirect, which has not rated the issue, said that LIC is a market leader in the Indian life insurance industry with strong distribution network and diversified product suite.

Geojit Financial Services
The brokerage has suggested investors to subscribe to the issue for short to medium term. “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,” said Geojit Financial Services.

Religare Broking
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.

Choice Broking
Despite opening up of the insurance market in 2000-01 to private players, LIC still commands a dominant position in the domestic market, thanks to its brand image and being a household name, said Choice Broking with a ‘Subscribe’ rating to the issue.

Samco Securities
Demographic tailwinds, a moderate penetration of life insurance in India and a massive protection gap will fuel the Indian life insurance industry’s multi-decadal growth, said Yesha Shah, Head of Equity Research, Samco Securities.

“Given the attractive valuation, the downside from here seems limited. Further, the fact that a discount has also been offered to retail investors is a cherry on the cake,” she added with a ‘Subscribe’ rating to the issue.

Marwadi Financial Services
“Considering the September 2021 embedded value of Rs 5,39,686 crore, the company is going to list at a P/EV of 1.1 x with a market cap of Rs 6,00,242.3 crore whereas its peers namely HDFC Life and SBI Life are trading at P/EV of 4.0x and 3.0x,” the brokerage said.

Swastika Investmart
There are concerns like loss of market share to private players, lower profitability and revenue growth compared to private players, lower VNB margins and short term persistency ratios, the brokerage said with a ‘Subscribe for Long term only.’

Ventura Securities
Their plans are a combination of insurance and investment with a guaranteed return. At this level of premium, life insurance as a proportion of GDP is projected to reach 3.8 per cent by FY26, up from 3.2 per cent in FY21, said Ventura Securities with a ‘subscribe’ rating.

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