LIC IPO: Subscription for the Initial Public Offering (IPO) of insurance behemoth Life Insurance Corporation (LIC) of India has opened today and it will remain open for bidding till 9th May 2022. While investors are busy scanning financials of LIC, grey market is also giving positive signals in regard to the public issue. According to market observers, LIC IPO GMP (grey market premium) today is 85, which is around 8 per cent higher from the LIC IPO price band of ₹902 to ₹949 per equity share. Like grey market, analysts are also bullish on the LIC IPO as they find it a suitable option for long-term investment.
Here we list out top 5 reasons to apply for LIC IPO:
1] Attractive valuation: Giving ‘buy’ tag to LIC IPO on attractive valuations, Kanika Agarrwal, Co-founder & Chief Investment Officer at Upside AI said, “The LIC IPO is priced very attractively. Since the government slashed valuation by 50 per cent to ₹6 lakh crore, its valuation to embedded value of around ₹5.4 lakh crore is reasonable at 1.1x. Private insurers trade at 2.5-4x.”
2] Diversification in single investment: “As of 30th September 2021, LIC was India’s largest asset manager, with assets under management (AUM) of $39.55 trillion, more than 3.3 times the combined AUM of all private life insurers in India and more than 1.1 times the AUM of the whole Indian mutual fund industry. LIC’s investments in listed shares accounted for about 4% of the NSE’s entire market capitalization as of Sep 21,” said Narendra Solanki, Head- Equity Research (Fundamental) at Anand Rathi Shares & Stock Brokers.
3] Dividend paying stock: Market experts believe that LIC will be one of the dividend paying stocks, which is another way of gaining from one’s investment.
“In addition to providing consistent income, many dividend-paying stocks are in defensive sectors that can weather economic downturns with reduced volatility. The Life Insurance Corporation of India is fully owned and controlled by the Government of India. After diluting stake by the government of India its remaining major shareholder in the company and investors can expect a healthy dividend from the company after it gets listed,” said Narendra Solanki of Anand Rathi.
4] LIC’s market leadership: Life Insurance Corporation of India is facing tough competition from private insurers but it’s still market leader. As insurance sector has low penetration in Indian population, this record low under penetration is expected to drive further growth for the already market leader Life Insurance Corporation of India.
“LIC of India has the highest commission-to-premium ratio of 5.5 per cent, compared to the top five private players’ median of 4.4 per cent,” said Narendra Solanki of Anand Rathi.
5] Strong long term outlook: LIC is synonymous with insurance in India and enjoys a huge competitive advantage in terms of brand value.
Advising LIC IPO bidders to have a long term time horizon, Santosh Meena, Head of Research at Swastika Investmart Ltd said, “LIC IPO subscribers must be aware that the business of insurance is long term in nature; therefore we recommend this issue for long term only and policyholders must grab this opportunity because of the discount given.”
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.