Vaibhav Agarwal of Teji Mandi said that although the subscription would be good as a large number of policyholders have opened demat accounts, the participation of individual investors is expected to be low.
LIC IPO: For which the government has been preparing for two years, LIC’s IPO is finally open for subscription. This is no less than a celebration for stock market participants. India’s largest IPO could knock on Dalal Street in mid-March.
Here are some positive and negative things about LIC, on the basis of which the decision to subscribe can be made.
Positive
In India, 3 out of 4 life insurance policies are sold by LIC. It is the largest insurance company in India and the fifth largest in the world. The company has 64% market share in terms of premium. The company has 13.4 lakh insurance agents who have been instrumental in shaping the current era of LIC.
LIC manages assets of about Rs 39 lakh crore, which is more than the entire mutual fund industry. This amount is 18.5 per cent of the total GDP of India for 22 fiscal years. As of September 2021, LIC accounted for about 4 percent of NSE’s total market capitalization.
If you want a slot in LIC IPO, policyholders have to do this important work by Monday, otherwise no discount will be available.
The corporation has a vast network of 13.4 insurance agents, 3,400 active microinsurance agents and 72 bancassurance partners. Confidence in the LIC brand can be measured by the 28.25 crore active policy till September 2021.
Negative
Although LIC has good penetration, it is losing its market share to private companies. In the first half of FY22, the ratio stood at 78.8 percent in the 13th month, 70.9 percent in the 25th month and 60.6 percent in the 61st month. These figures are much better for private companies.
LIC IPO: Learn how to open a Demat account with SBI YONO to invest in LIC
If a financial institution goes bankrupt due to financial crisis, the government uses LIC to revive it. After buying 51 per cent stake in IDBI Bank for Rs 21,600 crore, LIC has invested Rs 4,743 crore in it. Many such incidents have taken place.
LIC’s VNB (new business value) margin is not very good compared to its competitors. LIC’s VNB margin for FY21 stood at 9.9 percent, up from 9.3 percent in the first half of FY22. Where the VNB margin of LIC’s competitors is 20-25 percent.
Should you subscribe?
Despite the sheer size and visibility, I would recommend (Vaibhav Agarwal, Teji Mandi) to stay away from the company’s IPO because Matrix is better than other listed companies. LIC is losing market share to its peers. The company cannot take advantage of its strong agent base.
While the subscription will be good because a large number of policyholders have opened demat accounts, the participation of individual investors is expected to be low. On this basis, LIC cannot get premium valuation on the list.
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