Life Insurance Corporation of India (LIC) is likely to list on the stock exchanges on May 17, a week after its bumper initial public offering (IPO) closes.
The government is selling over 22.13 crore shares in LIC at a price band of Rs 902-949 a piece in the initial public offering, which opens on May 4 and closes on May 9.
As per the final papers filed with Sebi, the allotment of shares to the demat account of bidders will happen by May 16, post-which LIC would commence trading of equity shares in the stock exchanges and list ''on or about May 17''.
While anchor investors will bid for the share sale on May 2, the issue would open for subscription of institutional and retail buyers on May 4 and close on May 9.
The government is selling 22,13,74,920 shares in LIC, aiming to raise around Rs 21,000 crore.
While retail investors and LIC employees will get a discount of Rs 45 pershare, LIC policy holders bidding in IPO would get a discount of Rs 60 a share.
Up to 15,81,249 shares and 2,21,37,492 shares are reserved for employees and policyholders.
Over 9.88 crore shares are reserved for Qualified Institutional Buyers (QIBs) and over 2.96 crore shares for non-institutional buyers.
Ten percent of the LIC IPO has been reserved for policyholders. While bidding, a discount will also be offered to policyholders and LIC employees.
''Bids can be made for a minimum of 15 equity shares and in multiples of 15 equity shares thereafter,'' the LIC said in the Red Herring Prospectus approved by Sebi.
Expert view
Mohit Nigam, Head - PMS, Hem Securities
Life Insurance Corporation of India (LIC) was established on September 1, 1956, under the LIC Act by merging and nationalizing 245 private life insurance companies in India. LIC has been providing life insurance in India for more than 65 years and is the largest life insurer in India, with a 61.6 percent market share in terms of premiums (or GWP), a 61.4 percent market share in terms of New Business Premium (or NBP), a 71.8 percent market share in terms of number of individual policies issued. It had the highest gap in market share by life insurance GWP relative to the second-largest life insurer in India, ranked 5th globally by life insurance GWP, and 10th globally in terms of total assets. Their group products comprise group term insurance products, group savings insurance products, group savings pension products, and group annuity products. After the revised valuations the IPO has not become cheap but fair and will now depend on how its business is executed over the next few years to forecast the additional returns.
Surjendu Kuila, Co-Founder and CEO, Zopper, an Insurtech platform
Insurtech industry will amply benefit from the much-awaited LIC IPO. Most of the public insurers in the country were still evaluating digitization of customer journeys, which will get a boost post LIC IPO. With the next phase of insurance distribution being driven by ease and accessibility of insurance products, I think LIC IPO is a pivotal moment. For an Insurtech player such as Zopper, we would be keen to integrate our digital rails with LIC and distribute bespoke products. That would help in increasing insurance penetration.
Varun Sridhar, CEO - Paytm Money
With the LIC IPO coming up, we believe that May will be a record month for demat account openings in recent times. It is a milestone event for Indian Capital markets and is expected to bring millions of new investors. We at Paytm Money are excited for this opportunity as we have built one of the most robust and comprehensive trading and investment platforms in the country. More importantly, given the trust that LIC has built with the common man over the decades, a lot of these investors are expected to come from tier 2 & 3 towns. Our IPO product will allow these new retail and HNI investors to apply for the IPOs on the Paytm Money and Paytm app in a breeze.
Yash Gupta, Equity Research Analyst, Angel One Ltd
The Government has brought down the issue size from 5 percent to 3.5 percent due to adverse market conditions. Moreover, the Government has also reduced the pricing of the issue. As compared to earlier expected valuations of over Rs. 10 lakh crore. The company is now valued at Rs. 6 lakh cr. at the higher end of the price band.
At the offer band, the LOC IPO is valued at a Price/Embedded value of 1.06-1.1 its September 21 EV of Rs. 539,686 crore which is at a significant discount to listed private life insurance companies which trade at P/EV of 2.5-3.9x their December 21 EV. While HDFC Life Insurance is trading at a P/EV of 3.9x SBI Life and ICICI Pru Life trade at 3.2x and 2.5x their Dec’21 embedded value. While LIC valuations appear to be cheap as compared to listed private players investors need to keep in mind that LIC has a lower VBN margin of 9.9 percent in FY2021 as compared to private players who have VNB margins of 22-27 percent due to higher share of participation and group product. Despite lower margins and inferior business mix, we believe that the IPO is being priced reasonably and offers value to investors with a long-term view.
(With PTI inputs)
