Ashika Research View on LIC IPO:
Going ahead, LIC will likely to strengthen its omni-channel distribution network for individual products and increase its productivity.
India’s life insurance penetration stood at 3.2% in CY 2020 compared to the global average of 3.3%. Besides, protection gap for India was 83% as of CY 2019, the highest amongst all countries in Asia-Pacific. Thus, clearly there’s room for every player in the industry to grow without adopting cannibalism.
At the upper priced band of Rs 949, the issue is valued at 1.1x EV (Sep’21) which is at a significant discount to private sector valuations and investors are advised to ‘SUBSCRIBE’ to the issue.
If LIC IPO lists below issue price, investors should accumulate more: GEPL Capital MD Vivek Gupta
There will be some pressure on LIC’s market share in the near term it is unlikely to go below 50 percent as it has strong brand recall, says Gupta
LIC grey market premium declines
The premium for LIC IPO in the grey market has declined over the past few days. As per IPO Watch and IPO Wala, the sites that track grey market premium, the GMP for the IPO was quoting at Rs 65 per share earlier which has now fallen to Rs 60 as per IPO Watch and on IPO Wala the fall is much higher to Rs 50. Experts are attributing this decline in GMP to the global sell off that has been witnessed during the week.
LIC IPO – Subscription status at 1.00 pm
Source: BSE India
LIC has lost market share of retail APE over the years
Source: DRHP; Jefferies IPO Note
Implications of LIC listing on insurance sector:Jefferies
We believe, LIC’s listing will broaden investible universe and further raise sector’s relevance in investor’s portfolio. It will also help investors to better track sector dynamics as LIC disclosures become frequent. LIC has recalibrated its par and non par products ahead of the listing.
LIC IPO: Day 5 Subscription status at 12 noon
The IPO is subscribed 1.71 times till 12 noon with LIC policyholders leading the bout with 4.78 times subscription of their portion, Employees have reserved 3.63 times of their allocated portion, Retail investors have lapped up 1.50 times, NII portion 1.18 times and QIB portion is subscribed 0.67 times.
LIC is important for the government to meet its divestment targets: UBS
Besides SOE stock ownership, LIC is an important entity for the government in many ways. LIC owns over 19% of all government bonds (centre + states) making it bigger than the RBI, and surpassed only by the commercial banking system (who need to hold government bonds per regulations). Post listing, LIC would be the largest investment in the government’s portfolio of listed equities—43% of US$377bn in AUM. This is important from the point of view of government budget financing through divestments. At its valuation, proceeds from LIC would help meet the budgeted divestment target for FY22 (Rs780bn). There would be further dilution in the coming years (totaling US$8.6bn in two years and US$34bn in five years, at the current media-reported valuation). Assuming sufficient demand for this supply (not an easy assumption given the scale of these numbers), a decent chunk of the government’s divestment cash flows could be sustained by repeated dilutions in LIC.
Impact of pandemic on LIC
LIC was adversely impacted by the pandemic, especially in terms of sale of individual policies during all the three waves. For instance, sales of individual policies declined 22.7% to 6.35mn policies in Q4FY20 from 8.21mn in Q4FY19. Death claims also increased during the pandemic. For FY19, FY20, FY21 and 9MFY22, claims by death (net) totalled Rs 170bn, Rs 173bn, Rs 235bn and Rs 293bn respectively (consolidated basis) – these amounted to 6.72%, 6.79%, 8.14% and 12.49% of total benefits paid (net) respectively. Thus, any future Covid’19 waves could be detrimental to growth and normal operations.
LIC IPO: Day Subscription Status at 11:00 AM
Source: BSE India
LIC is the largest asset manager with a proven track record – BOB Caps
LIC was managing ~Rs 40 lakh crore in AUM (standalone basis) at end-9MFY22, which is 3.2 times that of all private insurers combined. Its policyholders’ funds have a well diversified investment portfolio. As of 9MFY22 (standalone basis), the policyholders’ investment portfolio included 38.1 percent central government securities, 24.6 percent equity securities, 24.3 percent state government securities and 8.4 percent corporate bonds. Similarly, 95.9 percent of debt AUM was invested in sovereign and AAA-rated securities. Over 90 percent of policyholders’ equity investments (standalone) are held in stocks that are a part of the Nifty 200 and BSE 200 indices. Net profit on sale/redemption of policyholders’ investments was Rs 23,900 crore at end-FY19, Rs 19,400 crore at end-FY20, Rs 39,800 crore at end FY21 and Rs 36,500 crore at end-9MFY22.
LIC IPO: Day 5 Subscription status
LIC IPO which opened for subscription on May 04, is open for subscription on Sunday as well. The issues is subscribed 1.68 times till 10:20 am with LIC policyholders leading the pack with 4.71 times subscription of their portion, Employees have reserved 3.57 times of their allocated portion, Retail investors have lapped up 1.47 times, NII portion 1.13 times and QIB portion is subscribed 0.67 times.