LIC IPO: Whether to invest or not, will one get allotment? What brokerages are saying?
NewDelhi: The much-awaited initial public offering (IPO) of state insurance behemoth Life Insurance Corporation (LIC) for Rs 20,557, will kick off for subscription from Wednesday, May 4, and will open till May 9. LIC is offering its shares in the range of Rs 902-949 per equity share, with a minimum bid of 15 shares, in multiples thereafter.
This IPO will be open till May 9 and the price band has been fixed at Rs 902-949 per share. In the IPO, policyholders will get a discount of Rs 60 and retail investors will get a discount of Rs 45 per share. The minimum bid is in 1 lot (15 shares) followed by a multiple of 15 shares.
Whether to invest money in LIC IPO or not? What is the minimum investment? Is there any discount?
LIC has kept a discount of Rs 45 for retail investors. If you apply for one lot of shares on the upper band, then instead of Rs 949 per share, you will have to pay Rs 904 per share. That is, for one lot you will have to pay only Rs 13,560 instead of 14,235.
If you have LIC policy then you will get a discount of 60 rupees. If you apply for one lot of shares in the upper band from the policy holder quota, then you will have to pay Rs 889 per share. That is, for one lot you will have to pay Rs 13,335 instead of 14,235.
What is the minimum one can invest?
Retail investors can apply for a minimum of one lot i.e. 15 shares. Accordingly, retail investors will have to invest a minimum of Rs 13,560 after a discount of Rs 45. The maximum limit is 14 lots, i.e. 210 shares. Investors can invest a maximum of Rs 1,89,840. Similarly, policyholders can invest a minimum of Rs 13,335 and a maximum of Rs 1,86,690 after a discount of Rs 60. However, policyholders and employees also have an additional benefit.
Varun Sridhar, CEO, Paytm Money said, Policy holders can apply for an IPO under two different categories. Retail Category and Policy Holder Category. That is, they can apply for 14-14 lots in both categories. The interesting thing is that if a person is a policyholder and an employee of LIC, then he can apply for 14 more lots under the employee category. That is, an employee can bid for a total of 42 lots. There is also a discount of Rs 45 per share in the employee category.
One will get a discount in one category
If you want to take a discount of Rs 45 for the retail investor and Rs 60 for the policyholder together, then it is not possible. You will get the discount only in one quota. You can either avail of a discount of Rs.45 from the retail investor or Rs.60 from the policyholder.
Will everyone get shares and how to apply?
The issue size of LIC is 21 thousand crores. This is India's biggest IPO till date. Therefore, the chances of getting shares are very high for most of the people applying for IPO. That is, you can say that all the people who fill the IPO will get the shares.
What brokerages are saying about LIC's IPO?
Most of the market analysts are advising to invest in this. Money can be made in IPO both in short term and long term. However, analysts are advising to stay in it for long term. This is because the business model of insurance companies is long term.
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The company is liking the margin expansion scope in life protection business. In H1FY22 VNB margin stands at 9.3 per cent, much lower than private-sector peers. The protection gap in India is 83 per cent (2019), the highest among APAC countries. Given the opportunity, India's life insurance NBP is expected to grow at 14-16 per cent CAGR over the next decade.
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At the upper end of the price band, the LIC IPO is offered at a P/EV (embedded value) of 1.1x as compared to other large listed private life insurance companies which are trading at multiples of 2.5-4.3 times the EV.
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The market-cap to EV ratio for its listed peers is in the range of 1.5x to 2.5x. The valuations of LIC with its majestic size and the network has a huge edge over others and are priced reasonably. Digital onboarding of its network will provide a great push to the growth.
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LIC is a market leader in the Indian life insurance industry with a strong distribution network and diversified product suite. The embedded value for LIC as of September 30, 2021, was at Rs 5.4 lakh crore. It has flagged concerns including adverse variation in persistence metrics and financial condition.