The initial public offering (IPO) of Life Insurance Corporation of India (LIC) is expected to open for subscription on May 4. . It is expected that there will be many investors, who have no prior experience of putting money into an IPO, will participate in the initial sale of LIC shares. They will be looking to participate in the subscription process perhaps for the first time.
The relentless rally in stocks since the outbreak of the pandemic has attracted younger, tech-savvy cohorts. Meanwhile, demat account growth is set to take another big leap with the highly anticipated IPO of LIC this week.
May will likely be a record month for demat account openings, said Varun Sridhar, CEO of Paytm Money. “It (LIC IPO) is a landmark event for Indian capital markets,” he said.
LIC, clearly, is no ordinary company that goes to the stock markets to raise funds. Formed by an Act of Parliament through the merger of 245 private insurance companies in 1956, it is the fifth largest insurer in the world in terms of gross premium. The company has over one lakh of employees, nearly 5,000 offices and around 14 lakh of agents. It manages assets worth Rs38 lakh crore, 15 times more than those managed by SBI Life, the second largest insurance company in India.
The government wants policyholders to participate by buying from their insurer and has reserved 10% of the total shares offered exclusively to policyholders and employees, with a discount. LIC had ramped up advertisements and public campaigns, calling on policyholders to update their PAN number and become eligible to claim that 10%, and pushing LIC agents to spread the word.
To appeal to young, first-time investors, LIC launched digital campaigns on social networks. Religare Broking, for example, launched the Pre-Apply LIC IPO application. “For this younger generation, LIC may not be attractive as a venture partner. But when it comes to investing, it certainly will,” said Ajit Misra, VP and Principal Technical Analyst at Religare Broking.
Should early investors subscribe to Tthere LIC IPO?
Successful registration outweighs potential risks. And “adjust the size” of the problem was a good decision. The valuation was “fair and attractive”, said Tuhin Kanta Pandey, secretary of the Department of Investment and Public Assets Management. “We want to defend LIC as a long-term value creator in the stock markets. The IPO is the first step in creating long-term value for LIC’s shareholders.
Speaking on whether new investors should invest in the IPO, Yash Gupta, Equity Research Analyst, Angel One Ltd. -time investors. Even retail investors enjoy a ₹45 per share rebate on LIC’s IPO, which gives retail investors more comfort and the risk of losses becomes much lower. New investors may consider LIC’s IPO for long-term investing.”
B. Gopkumar, MD and CEO of Axis Securities, said, “We believe that new investors should apply for the issue, as it allows the applicant to invest in a market leader with a long growth track. While there is skepticism around a first-time investment, we believe investors would be reassured by the long heritage and strong brand value and recall that LIC enjoys. Applying for the show allows new investors to directly own a stake in a strong brand through ‘Bharat’. Additionally, the expectation of a discount for retail and policyholders, allowing for slightly higher returns, could nudge new investors towards the question.” He also cautioned that while short-term market volatility is likely to weigh on equity performance, we remain positive from a long-term perspective.
Parth Nyati, Founder of Tradingo, said: “LIC is the largest life insurer in India, with 61.6% market share in terms of premiums (or GWP) and 71.8% market share in terms of number of individual policies issued as of December 31, 2021. LIC is synonymous with insurance in India and enjoys phenomenal brand recall. We believe that the heavily under-exploited life insurance space in India is still at a nascent stage and is well positioned to seize the huge growth opportunity. LIC enjoys many competitive advantages such as strong brand value, very large scale of operations, extensive agent network and envious distribution network. . The issue is priced at around 1.1 times intrinsic value, which is a steep discount to its Indian and global peers. However, new investors should be aware that the insurance business is long term in nature; therefore, we recommend this issue only for the long term.”
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