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The Russian-Ukraine war and the market volatility it brought along with it, put off the much-awaited Initial Public Offering of the Life Insurance Corporation of India (LIC). But now here’s some good news. The IPO is likely to open on May
4, 2022.
Details of the IPO
Size:
As per information available in the public domain, the size of the much awaited IPO is around Rs 21,000 crore (down from Rs 60,000 to Rs 65,000 crore envisaged earlier in February 2022). The government has set the price band for the IPO from
Rs 902-949 per share.
With that, the government which currently holds a 100% stake in the life insurance behemoth, LIC, could end up diluting 5% of its stake.
The LIC IPO will be the biggest ever in India’s stock market history. Overall, it would value the company at around Rs 6 trillion, which would be around 1.1 times its embedded value of Rs 5.40 trillion as of September 2021 (the time
of filing the red herring prospectus).
The embedded value represents the present value of shareholders’ interests in the earnings distributable from the assets of the life insurance business. This is after adjusting for an allowance for the aggregate risks in the business.
Will market leader status help LIC?
As LIC is a household name and enjoys a dominant market share (with over 60% in terms of premium) in the Indian insurance sector, its IPO is likely to get a good response from a wide range of investors––retail, HNI, and institutional.
A meaningful portion of the household savings is invested in various LIC policies. The Assets Under Management (AUM) of LIC currently stands at over Rs 39 trillion ––thrice the size of private life insurers and greater than the
total size of the Indian mutual fund industry.
Given the fundamentals of LIC, (i.e. its AUM, market share in terms of premium, income from investments, profitability, earnings per share and brand value amongst other factors), the IPO is likely to do well.
That being said, it would be advisable to analyse the following important points before investing:
How the money raised in the IPO will be utilised by the Company
Peer competition
The future growth prospects and plans of LIC
Assess if the offer price per share is justified
Market sentiment towards the IPO
Don’t forget the LIC IPO is coming at a time when the markets are volatile not only in India but globally as well.
Benefits for LIC policyholders LIC has reserved some portion of the total issue size for its policyholders and is offering them shares at discount of Rs 60. Policyholders who have linked their PAN with their LIC policies
would be eligible to participate in the IPO under the policyholder category. Similarly, for LIC employees and retail investors the discount will be Rs 40.
How to subscribe to LIC IPO through Axis Bank
Under Investment in the Axis Bank Internet banking Portal, Select the IPO option.
Complete your registration by filling in your required details.
Select the IPO from the drop-down, mention the number of shares, and the offer price you wish to bid.
Select the investor category. The highest bid amount will be calculated and a lien will be marked accordingly on your selected Axis Bank account.
The bid will be accepted and a unique transaction number will be generated as a confirmation.
If you do not have a Demat Account, open the Axis Direct 3-in-1 Account and experience a whole new world of investing. It is an all-inclusive platform that allows you to do much more than stock trading.
Disclaimer: This article has been authored by PersonalFN, a Mumbai based Financial Planning and Mutual Fund research firm. Axis Bank doesn't influence any views of the author in any way. Axis Bank & PersonalFN shall not be responsible for any direct / indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information. Please consult your financial advisor before making any financial decision
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How LIC Policyholders Can Invest in the LIC IPO - Quiz:
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