LIC IPO opens today: Is it worth to invest? What are the risks?
The centre plans to raise Rs. 20,557.23 crore much lower than the earlier estimated of about Rs. 60,000 crores.
New Delhi, May 04: All eyes are set on the launch of the much-awaited Life Insurance Corporation of India IPO that is set to open for public subscription today.
The country's largest insurer has garnered a little over Rs 5,627 crore from anchor investors led primarily by domestic institutions ahead of its mega initial public offering (IPO).
Out of the allocation of about 5.9 crore shares to AIs, 4.2 crore shares (71.12 per cent) were allocated to 15 domestic mutual funds through 99 schemes.
Price band: The price band for LIC IPO is Rs 902-949 per equity share. However, policyholders will get a discount of Rs 60 per equity share, while retail investors and employees will get a discount of Rs 45 on each share.
IPO size: The centre plans to raise Rs. 20,557.23 crore much lower than the earlier estimated of about Rs. 60,000 crores.
IPO lot size and limit: The maximum bid amount under policyholder, retail and employee quotas cannot exceed Rs 2 lakh (net of the discount).
According to Livemint, applicants will be able to apply in lots, where one IPO lot comprises 15 LIC shares. An applicant can apply for a minimum of one and a maximum of 14 lots or 210 shares. The minimum amount required to apply for the IPO, therefore, is Rs 14,235 ( i.e. Rs 949 x 15).
The LIC IPO share allotment is likely to be announced on May 12.
The LIC shares are expected to be listed on BSE and NSE on May 17.
Risks to buy LIC IPO
LIC is the largest insurer in India. However, LIC is facing competition from other private insurance companies, who have been thriving on this segment for too long
With over Rs 20 lakh crore invested in debt instruments, dependency on interest rate fluctuations may materially and adversely affect LIC 's profitability.
The government will still be the major shareholder and key manager of LIC. Thus, any future government intervention might be detrimental to shareholders.
LIC has disclosed that the total number of individual and group policies has witnessed a decline due to the COVID-19 pandemic.
Should you subscribe?
Despite shortcomings, experts have largely recommended investors to subscribe to the public issue.
"It will be a case of massive subscribe at the current price and it would be good buy for investors," Manish Sonthalia, associate director and fund manager at Motilal Oswal Asset Management Company is quoted as saying in a leading business portal news.
KR Choksey views: Subscribe for both listing and long term gains The brokerage is of the view that LIC has emerged as a consistent player in the insurance segment with steady margins and has also quickly streamlined with its product portfolio and distribution mix and is hence good to grab the opportunity going ahead.
"The protection segment is the next key trigger for growth for life insurers, where LIC's contribution is lower as compared to its peers. We believe, with increased focus on this segment, LIC is well poised to capture the industry opportunity," a report from KR Choksey said.
"We believe valuation for LIC is reasonable, keeping in mind the valuations at which the peers are trading and the industry average," the report from KR Choksey added.