Finally, LIC IPO Should You Invest?

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What has happened?

India’s largest financial institution, Life Insurance Corporation (LIC), which manages around Rs 40 lakh crore of public money,
Is getting listed on the stock exchanges with a Rs 21,000 crore initial public offering (IPO) early next month.

LIC on Wednesday priced its IPO, the largest in the history of the capital market despite a reduction in size, at Rs 902-949 per share.
LIC has offered a discount of Rs 60 for policyholders and Rs 45 for retail investors and employees.
The IPO will open on May 4 and close on May 9.
The government will sell 22.13 crore shares through the offering.
Investors can bid in multiples of 15 shares.
The size of the IPO was cut from Rs 65,000 crore to Rs 21,000 crore
as the Russian invasion of Ukraine and sustained selling by foreign portfolio investors (a net of Rs 1,48,078 crore since December 2021) affected the stock markets.
The government, which wholly owns the insurance behemoth, plans to sell a 3.5 per cent.

A couple of leading mutual fund managers said the reduction in valuation has made the issue attractive.
“While there is a lot of inherent strength in the company and there are growth prospects, the valuations too seem fine now after the revisions.
As the market is not witnessing a mad bull run that was being seen over the last year, there is a possibility that investors may not get immediate listing gains.
But it will generate decent returns over the next three to four years,” a leading fund manager said.
“There is a lot of strength in the company. There are many categories where LIC is not present on the business front, and so there is a lot of scope for it to explore these and grow.
As LIC had a monopoly, one can only lose market share from such a position.
It is, however, important to note that the company still maintains around a 60% market share and it could be a good company to invest with a medium- to long-term view,” said another fund manager.
Some see the listing as part of a strategic vision of the government aimed at long-term value creation for shareholders.
“There are two ways to look at it: one in the present case where everyone is buying policies to safeguard themselves from uncertainties… second, due to huge buying power in the hands of consumers, the margins might reduce.
One can subscribe with a long-term perspective,” said Manoj Dalmia, founder and director, Proficient Equities Limited.

LIC, formed by merging and nationalising 245 private life insurance companies on September 1, 1956, with an initial capital of Rs 5 crore, Now manages around Rs 40 lakh crore assets.
It is the fifth largest life insurer globally and the largest asset manager in the country.
As on December 31, 2021, it covered 91% of all districts and had 1.33 million individual agents, and had a market share of 61.6% in terms of premiums or GWP,
4% in terms of New Business Premium, 71.8% in terms of number of individual policies issued, and 88.8% in terms of number of group policies.

LIC’s profile will get a boost. Investors can trade in its shares or keep them long-term.
LIC will become more transparent and answerable to shareholders for any mismanagement.
It will have to follow the listing guidelines of stock exchanges and SEBI regulations.
While Pandey has ruled out a follow-on issue in the current financial year, markets are expecting more offers in the next financial year.
Moreover, the insurtech industry will benefit.
“Most of the public insurers in the country were still evaluating digitisation of customer journeys, which will get a boost post the LIC IPO,” said Surjendu Kuila, co-founder and CEO, Zopper.

Q) Which among the following is the first general Insurance company in India?