LIC-IPO Subscription: LIC-IPO was subscribed 1.5 times on Day 4, the retail portion will go through on Day 3

New Delhi: The initial public offering (IPO) of Life Insurance Corporation of India (LIC) continued to attract bidders on the fourth day of the bidding process. The issue was fully subscribed on the second day.

The Indian primary markets’ largest IPO to date, with a total value of Rs 20,557 crore, is open for subscription until May 9th. Retail bidders can even bid on the issue on Saturday, an unusual move aimed at attracting investors.

According to data from BSE, as of 2:00 p.m. on Saturday, May 7, investors have placed bids for 24.33.13.395 shares, or 1.5 times the 16.20.78.067 shares offered for subscription.

Under the five categories, the retailer, employee and policyholder quotas were fully subscribed. The policyholder share was subscribed 4.26 times, followed by 3.31 subscriptions for the employee award.

Qualifying institutional buyers have subscribed at 0.67x, while non-institutional bidders have been allocated 0.87x to date.

The offering is entirely an offer to sell about 22.13 billion shares of the Indian government, which owns 100 percent of the shares in the insurer but will sell only 3.5 percent of the company’s shares.

The company will sell its shares in the price range of Rs 902-949 but has offered a rebate of Rs 60 per share to its policyholders who will bid on the issue. Eligible employees and retail bidders will receive a rebate of Rs 45 per share .

The company has reserved 50 percent of the net issue for qualified institutional bidders (QIB), with non-institutional bidders (NIIs) receiving 15 percent of the issue. The remaining 35 percent share was allocated to retail bidders.

Life Insurance Corporation of India is valued at Rs 6 lakh crore which is approximately 1.12 times its Embedded Value (EV) of Rs 5.4 lakh crore. It’s pretty reasonable for its publicly traded peers, brokers said.

LIC’s assets under management increased by about 10 per cent to Rs.37,46,404.47 at the end of FY2021 from Rs.34,14,174.57 in the previous year. The company’s net profit increased to Rs.2,974.14 million from Rs.2,710.48 crore.

For the period ended 31 December 2021, LIC had total assets under management of Rs 40,90,786.78 crore and reported net profit of Rs 1,715.31 crore.

The majority of brokers are bullish on LIC’s IPO and have suggested subscribing to it. However, some have raised concerns about declining market share and the backlog of future share sales by the government.

LIC is the largest player in India’s underpenetrated life insurance sector, is a trusted brand and customer-centric business model with a presence across India through an omnichannel distribution network with unparalleled agency power, said Hem Securities.

“Being the largest wealth manager in India with an established track record of financial performance and profitable growth looks like a decent investment avenue,” it added, giving the issue a “subscribe” rating.

LIC is the 5th largest life insurer in the world by gross life insurance premiums (GWP) and the 10th largest insurer in the world by total assets. At the end of FY21, LIC had a 66 percent market share in new business premium (NBP).

There are concerns of losing market share to private players and having lower profitability and revenue growth compared to private players, said LKP Securities, which has a Subscribe rating on the issue.

“However, we believe that LICs’ distribution advantage, increasing distribution mix of direct and enterprise channels, and a gradual shift to non-participating, high-margin products could be potential drivers of LICs’ future growth, offsetting slower-than-industry growth rates.” , as the brokerage firm recently called it.

LIC operates through 2,048 branch offices, 113 departmental offices and 1,554 satellite offices. It operates worldwide including in countries such as Fiji, Mauritius, Bangladesh, Nepal, Singapore, Sri Lanka, United Arab Emirates, Bahrain, Qatar, Kuwait and the United Kingdom.

LIC has raised over Rs 5,627 crore from the anchor investors by allocating them 5.92 crore shares at Rs 949 per share, the insurer said in a filing with the exchanges. Of these, 4.2 million shares were allocated to 15 domestic investment funds.