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LIC IPO – The Much-Awaited Factsheet!

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The much-awaited initial public offering (IPO) of life assurance sector giant Life Assurance Corporation of India (LIC) will open for subscription on Wednesday, May 4, 2022.

The over Rs 21000 crore LIC IPO will be out there for subscription till Monday, May 9, 2022. The company’s price band has been fixed at Rs 902-949 per share.

LIC is the country’s oldest and largest life insurance firm. It was shaped by merging and nationalizing 245 private life insurance firms on September 1, 1956, with an initial capital of Rs 5 crore. LIC currently manages around Rs 40 lakh crore assets and is the fifth-largest life insurance firm globally and, therefore, the largest asset manager within the country.

As of December 31, 2021, it lined 91% of districts and had one 1.33 million individual agents, and had a market share of 61.6% in terms of premiums or GWP, 61.4% in terms of New Business Premium, 71.8% in terms of variety of individual policies issued, and 88.8% in terms of the type of group policies.

The Central government owns it, which can sell 22.13 crore (22,13,74,920) shares or 3.5% of its stake in LIC through the public providing. The IPO is entirely an offer-for-sale (OFS), and the government plans on raising over Rs 21000 crore through the sale.

The size of the IPO has reduced from Rs 65000 crore to Rs 21000 crore because of the Russian invasion of Ukraine and sustained selling by foreign portfolio investors (net of Rs 1,48,078 crore since the start of December 2021) affected the stock markets. Despite this, LIC IPO will be the most significant public offer within the country, surpassing last year’s Paytm IPO that garnered Rs 18,300 crore.

During the announcement of the IPO last week, the company proclaimed a reduction of Rs 60 per share for its policyholders and Rs 45 each for retail investors and LIC workers.

Half of the issue size has been reserved for qualified institutional buyers (QIBs), 35% for retail investors, and the remaining 15% for non-institutional investors.

Investors who want to subscribe to LIC IPO should bid in an exceedingly heap of 15 shares and multiples. They will shell out Rs 14,235 (excluding discounts) at the higher price band to get a single pile of LIC. The shares will be listed on both BSE and the NSE.

The candidates should note that the cut-off time for UPI mandate confirmation is Tuesday, May 10, 2021, up to noon. Their application might be canceled if they fail to do so.

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. In contrast, KFin Technologies is the registrar of the problem.

The analysis teams at Geojit Financial Services, Anand Rathi Share and Stock Brokers, and Reliance Securities have recommended a “Subscribe” to the offer in their IPO notes.

Geojit Research, in its report, noted, “At the higher price band of Rs 949, LIC is there at P/EVPS (Embedded Value Per Share) of 1.1x at a discount of 65% compared to the standard valuation of private life insurance companies. Although headwinds like declining market share, lower short-run persistency ratios, and sub-par margins demand a discount to non-public players, this valuation is engaging considering its sturdy market presence and profit improvement because of surplus distribution changes norms and robust sector growth outlook.

The share allotment will probably occur on Thursday, May 12, 2022. The shares are expected to be listed on Tuesday, May 17, 2022, as per the timeline given within the red herring prospectus (RHP).

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