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LIC IPO subscribed 63% on Day 1 with strong demand from policyholders

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LIC IPO subscribed 63% on Day 1 with strong demand from policyholders

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LIC IPO: Life Insurance Corp's initial share sale worth Rs 21,000 crore is set to hit the Street on Wednesday. Here's what analysts recommend now.

The mega IPO of Life Insurance Corporation of India (LIC) was subscribed 63 percent on Wednesday, the first day of the bidding process. The portions reserved for the life insurance giant's employees and policyholders were fully subscribed. LIC's initial share sale -- worth Rs 21,000 crore -- is the biggest the country has ever seen.
Investor categorySubscription
Retail56%
Employee1.1 times
Policyholder1.9 times
Non-institutional25%
Qualified institutional buyer33%

Eligible LIC policyholders can avail a discount of Rs 60 in the IPO. (How to avail discount for policyholders)
Prior to the launch of the mega IPO, the state-run life insurer LIC raised Rs 5,627 crore from anchor investors by allocating 5.9 crore shares. As much as 71 percent of the insurance giant's anchor book was subscribed by domestic mutual funds.
LIC commanded a premium of Rs 85 in the grey market ahead of the IPO, according to dealers.
LIC shares will be available for bidding under the IPO, the subscription window for which will be open till May 9 starting Wednesday. Potential investors will be able to bid for the stock of the state-run life insurance behemoth in a price band of Rs 902-949 apiece - in multiples of 15.
LIC shares will be listed on bourses BSE and NSE on May 17.
Here's what analysts make of the mega LIC IPO:
ICICI Direct has left the LIC IPO unrated. "LIC is a market leader in the Indian life insurance industry with a strong distribution network and a diversified product suite. Its embedded value as of September 30, 2021, was at Rs 5.396 lakh crore. At the upper end of the price band, the company is valued at around 1.1 times embedded the value as on September 30, 2021," the brokerage said.
Nirmal Bang recommends subscribing to the LIC IPO. The brokerage is of the view that LIC is poised to benefit from its market positioning and expected product launches. Nirmal Bang believes LIC's valuation is at a significant discount to private-sector peers.
Ventura Securities recommends subscribing to the issue at the upper end of the price band.
GEPL has a 'subscribe' rating on the LIC issue. The IPO is a lucrative investment given the company's majestic networks and expected double-digit growth.
The brokerage believes the LIC valuation is reasonable, with the market cap-to-embedded value ratio of its listed peers being in the range of 1.5 to 2.5 times.
"The IPO looks appealing because it has a large market share and a good distribution network of agents," said Manoj Dalmia, Founder and Director at Proficient Equities.
He believes one can invest in the LIC IPO with a long-term view. Those with a short-term view can book listing gains, he said.
"Everyone should apply, but the prospects should be long term rather than short term," said Ravi Singhal, Vice Chairman at GCL Securities.
"As all of them are receiving a good discount, their valuations are becoming more reasonable; however, further stake sales after one year are possible. So invest for the long term," he said.
Ravi Singh, Vice President and Head of Research at ShareIndia, believes the IPO is not attractively priced for adequate return growth. He suggests investors subscribe for listing day gains and wait for lower levels for a long-term investment.
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