The much-awaited initial public offering (IPO) of Life Insurance Corporation of India (LIC) is all set to open on May 4 in the Rs 902-949 per equity share price band.
The issue will close on May 9. The government will disinvest a 3.5 per cent stake in LIC to garner Rs 21,000 crore for the exchequer.
The IPO will entirely be an offer for sale (OFS) by the government and will not comprise any fresh issue of equity shares.
Divam Sharma, founder, Green Portfolio said, "The valuations of the business are near 1-1.5 times the embedded value which is at a substantial discount to listed private peers. However, the business margins of around 10 per cent are lower than the private peers (around 20-25 per cent), the scale of the business, the market leadership, track of managing a large AUM in the past, and most importantly the brand value derives comfort."
He suggested that retail investors should invest in the LIC IPO for listing gains. Policyholders should also subscribe to the IPO considering the discount they are getting on the price band.
"There is a fair degree of interest in the LIC IPO from retail investors. We opened around 45,000 accounts for the IPO alone last month. Of these, 40 per cent of customers are new to the market," pointed out B Gopkumar, MD & CEO, Axis Securities.
"While near-term market volatility is likely to weigh on the stock performance, we remain positive from the long-term perspective. Given the under penetration of insurance and improving financialization of savings, we expect LIC to maintain its market leadership position backed by robust business traction," he said.
"Additionally, a strong rebound in terms of NBP/APE growth enabling market share gains in Q4FY22 hints at strong investor interest before the IPO. Thus, we believe investors should subscribe to the IPO for the long term, as we are confident that the structural story for the life insurance industry remains intact as uncertainties during the pandemic have highlighted the benefits of life insurance," he added.
"Earlier it was expected that the valuations will be around Rs 13,00,000 crores but now it will be around Rs 6,00,000 crores and embedded values are around Rs 5,40,000 crores, so the LIC IPO is valued at around 1.1 times of its embedded value," Yash Gupta, Equity Research Analyst, Angel One Ltd, told Business Today.
"Private players are trading at around valuations of 2-3 times of embedded value. As policyholders are getting a discount of Rs 60 so it will be more lucrative for them," he added.
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