LIC IPO subscribed 85% on Day 2; policyholders 2.58 times, retail 0.78 times

Initial Public Offering (IPO) of Life Insurance Corporation of India (LIC) has been subscribed 85 per cent so far on Day 2. For policyholder and retail quotas the issue has already been oversubscribed at 2.78 times and 1.76 times, respectively. Employees’ quota has received bids 0.78 times so far on Day 2. Similarly, Qualified Institutional and Non-Institutional Investors have received 34 per cent bid for their quotas. The insurance behemoth has fixed a price band of Rs 902-949 for the public issue and offered a special discount of Rs 45 per share to retail investors and employees of LIC and Rs 60 to policyholders.

The discount is available for policyholders, who bought their policy on or before April 13, 2022, the day LIC had filed its draft red herring prospectus with the Securities and Exchange Board of India (SEBI). The government through the IPO is disinvesting its 3.5 per cent stake to collect approximately Rs 21,000 crore from the markets. 

It is the largest ever IPO. Thus far, Paytm IPO (in 2021) was the largest ever IPO in the country at Rs 18,300 crore, followed by Coal India Ltd. (CIL) at around Rs 15,500 crore and Reliance Power in 2008 at Rs 11,700 crore. According to statistics, the largest insurance company has currently around 29 crore policyholders, 2 lakh plus employees and 13 lakh agents covering 91 per cent of districts of the country. It manages Asset under management (AUM) of 39 lakh crore, which is more than GDP of 150 countries and total AUM managed by the mutual fund industry which is around 38 lakh core.

Most of the brokerage houses have given a positive rating to the IPO given its fair valuation

FundsIndia gave the IPO an attractive valuation stating, “There will be a lot of first-time investors, especially from the tier 2 and 3 markets to participate in this IPO. This IPO is expected to be a milestone event in the capital markets not just with the issue size but also with the number of demat accounts that will be opened during this period. What the investors would look for before investing in the LIC IPO would be penetration of LIC in markets untouched by the private insurance players, being a first mover in the insurance play in India. LIC has this upper hand and it continues to lead the space with its far reach of the network both through agents and branches. The price at which LIC is coming with an IPO seems attractive on the valuation front.”

Sharekhan also gave it attractive valuation stating Sharekhan believes that LIC’s IPO should be structurally positive for life insurance, in the long run, considering its size and scale, which may also lead to higher awareness about insurance products benefitting across the sector. At the IPO price band of Rs 902-949, the offer is valued at 1.06-1.11 times its embedded value, which is lower than both domestic and global listed insurers’ average valuation. Hence, the valuation looks attractive given its leading market share in many parameters and highest RoE amongst its global peers.

Also read: LIC IPO: Policyholders and retail portion oversubscribed on Day 1

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