Life Insurance Corporation of India (LIC) is ready to hit the streets with its initial share sale of Rs 21,000 crore. Most analysts recommend subscribing to LIC’s IPO from a long-term perspective and looking for short-term gains.
State-owned life insurer LIC raised Rs 5,627 crore from anchor investors by allocating Rs 5.9 crore in shares. As much as 71 percent of the insurance giant’s anchor book was underwritten by domestic mutual funds.
LIC’s shares will be available for bidding as part of the initial public offering, the subscription window of which will be open until May 9 from Wednesday. Potential investors will be able to bid for shares in the state-owned life insurance giant at a price band of Rs902-949 each, in multiples of 15.
LIC shares will be listed on the BSE and NSE stock exchanges on May 17.
Here’s what analysts are saying about LIC’s mega IPO:
ICICI Direct has left LIC’s initial public offering unrated. “LIC is a market leader in the Indian life insurance industry with a strong distribution network and diversified product set. Its incorporated value as at 30th September 2021 was Rs 5,396 lakh crore. At the higher end of the price band, the company is valued at about 1.1 times the value incorporated as of September 30, 2021,” the brokerage said.
Nirmal Bang recommends subscribing to the LIC IPO. The brokerage believes that LIC is poised to benefit from its market positioning and expected product launches. Nirmal Bang believes that LIC’s valuation is at a significant discount to private sector peers.
Venture Values recommends subscribing to the issue at the higher end of the price band.
GEPL has a ‘subscription’ rating on the issuance of LICs. The initial public offering is a lucrative investment given the company’s majestic networks and expected double-digit growth.
The brokerage believes that the LIC’s valuation is reasonable, with a ratio between market capitalization and the integrated value of its listed peers in the range of 1.5 to 2.5 times.
“The initial public offering looks attractive because it has a large market share and a good dealer distribution network,” said Manoj Dalmia, founder and director of Proficient Equities.
He believes that one can invest in LIC’s IPO with a long-term view. Those with a short-term view can book trading profits, he said.
“Everyone should apply, but the outlook needs to be long-term rather than short-term,” said Ravi Singhal, vice president of GCL Securities.
“Since they are all getting a good discount, their valuations are becoming more reasonable; however, further shares may be sold after one year. So invest for the long term,” he said.
Ravi Singh, Vice President and Research Director at ShareIndia, believes that the IPO is not priced attractively for adequate growth in returns. He suggests that investors sign up to price in the day’s earnings and wait for lower levels for a long-term investment.