LIC IPO: For which the government has been preparing for two years, the IPO of LIC is finally going to open for subscription. It is no less than a festival for the stock market participants. India’s biggest IPO may knock on Dalal Street in mid-March.
Here are some positive and negative things about LIC, on the basis of which a decision can be taken to subscribe.
3 out of 4 life insurance policies in India are sold by LIC. It is the largest insurance company in India and the fifth largest in the world. The company has a 64% market share in terms of premium. The company has 13.4 lakh insurance agents, who have played a key role in building the current era of LIC.
LIC manages around Rs 39 lakh crore of assets, which is more than what the entire mutual fund industry manages. This amount is 18.5 percent of the total GDP of India’s FY 22. As of September 2021, LIC accounted for about 4 per cent of the total market capitalization of NSE.
If you want a slot in LIC IPO, then policy holders should do this important work by Monday, otherwise the discount will not be available.
The Corporation has a vast network of 13.4 Insurance Agents, 3,400 Active Micro Insurance Agents and 72 Bancassurance Partners. The trust in the LIC brand can be gauged from the 28.25 crore active policies as of September 2021.
Even though LIC has a good penetration, it is losing its market share to private companies. In the first half of FY22, the persistency ratio stood at 78.8 percent in the 13th month, 70.9 percent in the 25th month and 60.6 percent in the 61st month. These figures for private companies are much better.
LIC IPO: How to open Demat account on SBI YONO to invest in LIC, know the complete process
If a financial company goes bankrupt due to financial crisis, then the government uses LIC to revive it. After buying 51 per cent stake in IDBI Bank for Rs 21,600 crore, LIC invested Rs 4,743 crore in it. There have been many such cases.
LIC’s VNB (value of the new business) margin is not very good compared to its competitors. LIC’s VNB margin for FY21 stood at 9.9 per cent, as against 9.3 per cent in the first half of FY22. Whereas LIC’s competitors have a VNB margin of 20-25 per cent.
Should you subscribe?
Despite the sheer size and visibility, I would recommend (Vaibhav Agarwal, Teji Mandi) to stay away from the company’s IPO as the metrics are better in comparison to other listed companies. LIC is losing its market share to peers. The company cannot take advantage of its strong agent base.
While subscription will be good as a large number of policyholders have opened demat accounts, the participation of individual investors is expected to be low. On this basis, LIC cannot get the premium valuation on the listing.
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