The blockbuster IPO of Life Insurance Corporation of India (LIC) got 67 percent subscription on day one of the opening of the offer, with strong demand coming from the policyholders, employees and retail investors.
LIC policyholders led the bout as they lapped up twice (1.99 times) their portion of the offer. The portion allocated to the employees also got fully subscribed (1.17 times) on day one itself while the retail investors closed on 60 percent of their allocated portion.
The portion set aside for non-institutional investors was subscribed 0.27 times while qualified institutional buyers lapped up 33 percent of their allocated portion on day one.
A total of 10,86,45,360 shares received the bids as against the offered 16,20,78,067 equity shares (excluding shares offered to anchor investors), by 7:00 pm on the stock exchanges. The IPO is an offer-for-sale of up to 221,374,920 equity shares of face value of Rs 10 each wherein the Government of India is aiming to garner Rs 21,000 crore against the sale of 3.5 percent of its stake.
The corporation had already raised Rs 5,627 crore from anchor investors on May 2, who were allotted 5,92,96,853 equity shares at the upper price band of Rs 949 per share.
The brokerages have given a thumbs-up to the IPO recommending investors to ‘subscribe’ to the issue. They believe that LIC’s dominance in the market is well-positioned to capture India’s underpenetrated life insurance market.
It is the largest life insurer in India across the parameters of GWP (gross written premium), NBP (new business premium), number of individual policies issued, and number of group policies issued. It has a market share of 61.4 percent in NBP (individual and group) as compared to the next largest competitor which had a market share of 9.16 percent basis NBP (individual and group).
It is ranked fifth globally by life insurance GWP and 10th globally in terms of total assets. As of December 31, 2021, LIC had 2,048 branch offices and 1,559 satellite offices in India, covering 91 percent of all districts in India.
In light of LIC’s market positioning and expected product launches, the company is poised to benefit to a great extent and at the upper price band of Rs 949, the issue is valued at 1.1x EV (September 2021) which is at a significant discount to private sector valuations
LIC had a market share of 61.6 percent in terms of premiums or GWP, 61.4 percent in terms of New Business Premium (or NBP), 71.8 percent in terms of number of individual policies issued, and 88.8 percent in terms of number of group policies issued, for the nine months ended December 31, 2021
Data shows that the protection gap in India is 83 percent (as of 2019), the highest among APAC countries. Given the opportunity, experts feel that India’s life insurance NBP is expected to grow at 14-16 percent CAGR over the next decade.
As of December 31, 2021, the corporation covered 91 percent of all districts in India and had the largest individual agency network among life insurance entities in India, comprising approximately 1.33 million individual agents.
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