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LIC IPO GMP, Subscription, Valuation, Outlook Explained; Should you Subscribe on Day 5?

The initial public offering (IPO) of Life Insurance Corporation of India (LIC) received overwhelming response from investors so far. India’s biggest public issue will remain open on Sunday, May 8 for investors. LIC IPO was subscribed 1.66 times on the fourth day of bidding. Investors across categories bid more than 26.83 crore shares against the offer size of 16.2 crore shares.

Life Insurance Corporation of India opened its public issue on May 4. The government is planning to raise Rs 21,000 crore through LIC IPO by liquidating 3.5 per cent of its stake in the insurer. The price band for LIC IPO was fixed at Rs 902-949 per share. LIC policyholders are eligible for a discount of Rs 60 per equity share. There will also be a discount of Rs Rs 45 each for retail individuals and employees categories.

LIC IPO Subscription Status

LIC IPO garnered total bids worth Rs 24,365 crore till the fourth day of subscription. Investors, especially LIC policyholders and employees showed massive interest in India’s biggest life insurer’s public offer. The portion set aside for policyholders’ was subscribed 4.67 times, according to the data available with the National Stock Exchange. The employees’ portion was booked 3.54 times on the fourth day. Retail investors bid 1.46 times for the shares reserved for them on Saturday. Non-institutional investors’ reserved portion was fully subscribed on May 6. The quota alloted for qualified institutional investors was booked 67 per cent on Day 4.

LIC IPO Grey Market Premium

The unlisted shares of LIC was trading at premium of Rs 50 in the grey market, according to the data available on IPO Watch on May 7. The grey market premium indicates that LIC shares will be listed at Rs 1,009, 6 per cent up compared to the higher-end of the price band Rs 949. The sharp sell-off in the secondary market last week, impacted the grey market premium of LIC IPO, believes analysts. However, LIC GMP has improved in the last 24 hours.

LIC IPO Valuation:

“LIC with its dominant position is well placed to capture the highly underpenetrated life insurance industry in India. We like its increasing focus on non-par products which could boost its value of new business or VNB margins.

It is valued at 1.1x 1HFY22 embedded value (Rs 5.4 lakh crore) which is at significant discount to its private listed peers,” said Motilal Oswal in a note.

LIC IPO: Should you Subscribe?

“LIC being Fifth largest life insurer globally by GWP and the largest player in the fast growing and underpenetrated Indian life insurance sector is trusted brand and a customer-centric business model. has presence across India through an omni-channel distribution network with an unparalleled agency force. Company being largest asset manager in India with an established track record of financial performance and profitable growth looks decent investment avenue. Hence we recommend subscribe on issue,” said Hem Securities.

“Though there are concerns over LIC regarding market share loss in individual insurance business and historically lower margins, we believe that valuations factor in most of the negatives. Expected improvements in product mix and greater transfer of surplus to shareholders account over the coming years are expected to drive profits from current low levels, which along with cheap valuations provide comfort. Moreover, discount of ₹45 and ₹60 for retail investors and LIC policyholders makes the issue more attractive for them. Hence, we are assigning a ‘subscribe’ recommendation to the issue,” Angel One said in a note.

Other well known brokerages such as Motilal Oswal, Reliance Securities, LKP Securities also recommended to subscribe LIC mega IPO.

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