Life Insurance Corporation is India’s biggest life insurer. LIC’s upcoming mega IPO is predicted to generate early-stage profits as the company's 29-crore policyholder base will help them profit, despite turbulence in the markets due to US Fed tightening rates. The LIC IPO will be available to the public until May 9, 2022. This is the first time that a publicly offered company has given a special dispensation like this weekend's opening, which will allow people to take advantage of the discount prices and purchase shares. The price range for LIC IPO is Rs 902-949 per share and the company is offering a discount of Rs 45 per share for retail investors and LIC employees and Rs 60 per share for its policyholders. LIC is one of the most trusted brands in the nation. It was regarded as the 3rd strongest and 10th most valuable global insurance company according to the “Insurance 100 2021 report” released by Brand Finance. In IPO the first-mover advantage and its stiff position in the market make it worthy of long-term growth potential.
What do we know so far?
LIC’s IPO was subscribed 1.38 times so far on the third day of bidding. The issue had got fully subscribed towards the end of the second day led by policyholders and employees according to the data by NSE released at 07:00 PM on Thursday. Same data also showcased that the policyholder's segment was subscribed 4.01 times while the employee's portion was subscribed 3.06 times. It was notable that, the qualified institutional buyers (QIBs) were subscribed 0.56 times, the non-institutional investors subscribed 0.76 times and the retail segment was subscribed 1.23 times.
The initial public offer of shares works out to 5% of the current capital of 632.49 crores of total equity market capitalization, with the government retaining the majority shareholding at 95%. As of May 6, the annual calculation showed an ₹ 4.07 earnings per share. It was observed that a return on the net worth of 45.65% for the Fiscal end of March 2022, with a net asset value of ₹ 12.68 per share now.
LIC IPO: The benefits that will be reaped?
The government is authorized to all proceeds of the offer, with exception of the expenses necessary for the offer and other taxes that apply. The giant life insurance company will not receive any proceeds from this offer. The government expects to generate between ₹ 50,000 crores and ₹ 1 lakh crore (Rs 500 billion- Rs 100 billion) from the IPO. This is proportional to the offer price. If we follow the prospect of the economy here then, the government is expecting it to help in reducing the deficit and increase the revenue from the IPO.
Voting shares will allow more people to invest in LIC, which means more fruitful performance and transparency. LIC, which is connected with the government but not the public, but after the IPO, LIC will have to share all of the information about its price sensitivity with investors and the stock market. LIC's ultimate responsibility is accountability to investors--to make sure they are getting a satisfying return on their investment, as well as transparency about everything thus leading to increased corporate governance.
What do people need to know about reservations in buying LIC Stock?
It is tentative that not exceeding 5 % of the offer will be reserved for employees. Another portion will be reserved for eligible policyholders not exceeding 10 % of the offer. Employees and policyholders may get shares at a discount. The corporation hasn't disclosed the details, but it's probably 5% off the offer price for those groups.
There will be a minimum reserve of 35% of the investment for retail investors and up to 60% for anchor investors. These will be dominantly QIB (qualified institutional buyers) on a discretionary basis who need to be qualified by the bank. One-third of the anchor investor offer is reserved for domestic mutual funds.
Where to Purchase LIC IPO?
To register for LIC IPO on the internet, an investor has to create a Demat account and a trading account with a financial service that provides this facility. They can use different brokerage and stock apps like Groww, Zerodha, and Upstox or use the account of any other depository participant (DP) to book the issue.
Guidance for policyholders: You will have to first link your both policy and Demat account with your Permanent Account Number (PAN) if you are a LIC policyholder. Investors can bid for a minimum of 15 shares and in multiples of 15 thereafter, to subscribe to the LIC IPO. This means that you can bid for 15, 30, 45, 60 shares, and so on. However, the LIC has set a maximum amount of Rs 2 lakh for retail investors, policyholders, and employees.
How will Investors Respond to Challenges?
The IPO will help achieve the government’s ambitious target of Rs 78,000 crore for divestment this year but it may be challenging for the company to get investors. With international concerns over inflation, and with investors looking for higher interest rates, markets are likely to remain pressured. A US hike will lead to FPI funds being pulled out of emerging markets, causing pressure in secondary markets, reducing liquidity, and the issue size of large LIC matters that is north of Rs 50,000 Crores.
In the shorter term, a decline in markets would limit the government’s ability to command a higher premium. The government may have to settle on a lower price to make it attractive to investors.
An Overview of the LIC IPO
Investors should study the pricing and value of the securities, as well as how many different groups of investors are interested. The QIP will help to show who is most willing to invest in the issue. The IPO is deemed to provide breathing space to the Indian government when it comes to disinvestment.
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