LIC IPO Launched: 21000 crore mega issue opened, share price in grey market reduced, money will have to be invested in a profitable deal?

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LIC IPO Launched: The wait for the mega IPO of the country’s largest insurer Life Insurance Corporation (LIC) is over. The issue will be open for investment today from Wednesday, May 4 to May 9. LIC has fixed the price band for the IPO at Rs 902-949 per share. At the same time, the lot size is 15 shares. Investors can bid for a maximum of 14 lots. The size of LIC’s IPO is Rs 21,000 crore. There has been a huge craze among investors about this issue. On May 2, The Aiker investors had also given a tremendous response to it and the company raised Rs 5,627 crore from them. The question arises whether putting money into LIC’s IPO would be a lucrative deal or not. Should the upper price band bet on Rs 949? Know what the expert’s advice is on this.

LIC IPO

The price of LIC’s stock in the grey market has declined. It has come down to Rs 65 today from Rs 85 on May 3. While last week, its price reached Rs 90 in the grey market. At present, on the day of the opening of the issue today, it has come down to Rs 65. In this sense, the listing of the stock can be at a premium of Rs 1014 (949 + 65 = 1014) i.e. less than 10 percent. However, until the listing of the stock is done, there will be a change in the price of the grey market.

Angel One

Brokerage house Angel One says that the product mix is expected to improve further. At the same time, in the coming years, more and more transfers of surplus to the account of shareholders are expected to increase profits from the current low level. The valuation of the issue is attractive. In addition, a discount of Rs 45 and Rs 60 for retail investors and policyholders makes the issue all the more attractive for them. Therefore, it is advisable to subscribe to LIC’s IPO.

Samco Securities

Yesha Shah, Head of Equity Research, Samco Securities, says that if all factors are taken into account, it is advisable to subscribe to LIC’s IPO. He says that from the point of view of valuation, the LIC on the upper price band is priced at an embedded value of 1.1x. It’s at a discount compared to Pierce. Given the attractive valuation, the decline from here seems to be limited. Apart from this, retail investors have also been offered discounts.

Find out what the top analysts say

Ten analysts from the country have advised investors to subscribe to it. Reliance Securities, Nirmal Bang, Angel One, Religare Broking, Choice Broking, GE Capital, Marwadi Financial Services, and Ventura Securities have been advised to subscribe to LIC’s IPO. Geojit Financial has advised subscribing to it for the short to long term. Swastika Investment has advised investors to invest in it for the long term.

What investors do

Yash Gupta of Angel One said that the share price of LIC is cheaper than that of listed companies. But investors should keep in mind that in FY2021, the margin of value (VNB) of its new business was 9.9 percent, while in the case of private companies it was 22-27 percent. Despite the lower margin and the insider business mix, the price of this IPO is fine and it can be beneficial for investors in the long term.

Beneficial for the long term

At Rs 949, LIC’s stock is 1.1 times its embedded value at rs 949, which is 65 percent cheaper than the average valuation of private life insurance companies. Hdfc Life Insurance’s stock is trading for 4.1 times the embedded value. Similarly, sbi life’s share is trading at 2.9 times the embedded value and icici prudential life’s share is trading at 2.2 times. The company’s embedded value in September 2021 was Rs 5.4 lakh crore.

Find out what analysts say

Most analysts have given a subscribe rating to LIC’s IPO. He says its valuation is 1.1 times its embedded value, which is 65 percent less than that of private companies in the insurance sector. Sandeep Sabharwal of asksandipsabharwal.com says that the price of LIC’s IPO is much better than the initial estimates. He said that its size has been drastically reduced. At one time, there was talk of raising Rs 70,000 crore from this IPO, but now its size has become Rs 20,000 crore.

The largest IPO

The government had earlier planned to sell a five percent stake in LIC but now it has been reduced to 3.5 percent. Despite being reduced in size, it is the largest IPO in the country. Earlier, this tag was with Paytm. Paytm’s Rs 18,300-crore IPO came last year. LIC has raised Rs 5,627 crore from anchor investors. 5.92 crore shares were reserved for anchor investors at the rate of Rs 949 per equity share.

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