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LIC IPO Day 1: 63% issue booked; employees portion fully subscribed, policyholders 1.84 times, retail investors 56%

The government will be selling a 3.5 percent stake entirely through an offer for sale (OFS). Of which 10 percent of the shares are reserved for LIC policyholders and 0.7 percent for LIC employees. Also, 31.25 percent is reserved for household (retail) investors.

The biggest initial public offering (IPO) in the history of Indian markets, LIC IPO was subscribed63 percenton May 4, the first day of bidding. The LIC policyholders lead initial bout of buying in insurer’s IPO as they have subscribed 1.84 times the portion reserved for them. The employee reserved portion has subscribed 104 percent, while retail investors portion has been subscribed 56 percent. Non Institutional investors have subscribed 25 percent of their portion while qualified institutional buyers bought 33 percent of allotted quota of 3.95 crore shares, till now.

India’s life insurance industry is expected to grow rapidly, owing to a relatively underpenetrated market and expanding awareness, which presents a multi-year growth opportunity. LIC has been providing life insurance in India for over 65 years and is the country’s biggest life insurer, with a significant brand value advantage. “There are concerns about losing market share to private players and having lower profitability and revenue growth when compared to private players. However, we believe that LIC’s distribution advantage, increasing sales mix of direct and corporate channels, and a gradual shift to high margin Non- participating products could be possible drivers for LIC’s future growth, negating lower than industry growth rates,” said LKP.

At the upper price band, the brokerage said the stock is priced at 1.1x of its 2QFY22 Indian Embedded value (Market capitalization/Embedded value: Rs 6 trillion/Rs 5.39 trillion), which is at a significant discount to its listed peers. “Currently listed insurance companies trade at Market capitalization/EV multiple of ~2.8x. LIC has a marquee anchor list of investors and we recommend subscribe to the LIC IPO.”

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