LIC IPO Opens on 4th May, 22 - Know all the Details
Finance Minister Nirmala Sitharaman has made an announcement in her Budget Speech of 2021-22 about upcoming Biggest IPO of Indian Equity Market, LIC which was supposed to come up in F.Y. 2021-22. However, LIC IPO got delayed and here it is. LIC IPO will be open for subscription to public from 4th May, 2022 and to anchor investors, policyholders and employees from 2nd May, 2022. There are a lot of reviews, suggestions, and estimations available in the market saying whether one should apply or avoid which tend to confuse investors. Well, here are some of the things one should consider before investing. Also, looking at the India History of big IPOs (Paytm, Reliance Power, SBI card, GIC) people are afraid to invest. So, here are the facts, pros and cons one should look at before subscribing to an IPO.
About the company: Life Insurance Corporation (LIC), 5th largest insurer globally and largest asset holder in country, is India’s biggest life insurer. Even after Liberalization LIC remained biggest player with 64% of the market share.
LIC was formed by merging and nationalizing 245 private life insurance companies on 1st September, 1956 with initial capital of ₹5 crores which now manages around ₹40 lac crore assets (As of Spetember, 21 LIC has 39.74 Trillion AUM (Asset under management) which is thrice the AUM of all private insurers taken together).
About an IPO: ◇ Opening Date: 4th May, 2022 Close Date: 9th May, 2022 ◇ Price Band is from 902-949. A lot will consist of 15 shares. (Minimum Investment – ₹14,235) ◇ Discount of ₹60 per share to all policyholders. ◇ Discount of ₹45 per share to all employees/retail investors. ◇ Valuation of LIC will come out as 6 lac crore at upper band price (949). ◇ Government will sell around 3.5% stake to raise almost 21,000 crores. ◇ After listing of this IPO, LIC will emerge as third most valuable company after TCS and Reliance Industries.
GMP: ◇ As per various sources, the premium on LIC shares in grey market reached to 80% on 28th April, 22. ◇ LIC shares commanded a premium of ₹ 45 over higher price band of IPO.
Financials:
Pros/Positives: ◇ LIC has more than 13.5 lakh agents who bring new customers and LIC hold largest part of the market share. ◇ LIC own 4% of listed stocks in India and more government bonds than RBI. ◇ A range of life insurance products which can satisfy varied insurance requirements of customers.
Cons/Negatives: ◇ P/E Ratio of LIC at Upper price band is approximately 201 which is higher than Industry P/E ratio of 79.77, which seems quite unrealistic. ◇ Continuous reduction in market share of LIC to private insurers is point to worry about as well. ◇ Extreme valuations may imply that the risk and reward of the investment is not favorable at the current price levels.
As you can observe there are several pros and cons to this IPO so, investors should check should think twice before investing and this blog does not intend to recommend anything.
However, this blog can serve important purpose for educational research. Happy Learning and Happy Investing!!
Comments