LIC IPO at Discount for Policyholders, Sees Strong Response; Should you Invest? How to Buy

LIC IPO: The mega LIC IPO performed as expected on the first day of its opening, with bidders across all categories rushing to book the issue. The initial public offering (IPO) of the Life Insurance Corporation of India (LIC) was subscribed 67 per cent on Day 1 of its opening, as per NSE data. The LIC IPO is an offer-for-sale of up to 221,374,920 equity shares, through which the selling stakeholder — the central government — looks to garner Rs 21,000 crore to meet its divestment targets for the current financial year.

The LIC IPO opened on May 4 and the shares will be up for bidding till May 9, where the government is offloading 3.5 per cent stake in the company. The LIC IPO would remain open on Saturday (May 7) between 10 am and 7 pm, NSE said in a notification on Wednesday. The LIC IPO price band has been set at Rs 902 to 949 per equity share, with discounts for some categories.

LIC IPO Subscription Status

According to NSE data, policyholders booked almost double of the portion allotted for them, subscribing 1.99 per cent or 4,40,31,225 shares against 2,21,37,492 shares, as of Day 1. The Employee quota was subscribed 1.17 times, while retail investors booked 60 per cent of their portion. The non retail investors bid for 27 per cent of the portion meant for them, while QIBs bid for 33 per cent of the shares set aside for them. A total of 10,86,91,770 shares received bids against 16,20,78,067 shares up for sale.

LIC IPO GMP Today

As of May 4, the unlisted shares of LIC were fetching a premium of Rs 85 per equity share, as per market observer. The LIC IPO GMP was fixed at 9 per cent. his means, at the upper end of the price band, LIC shares are trading at Rs 1,034 (Rs 949 + Rs 85), as LIC IPO GMP today is Rs 85.

What is LIC IPO Policyholders Quota?

In a first, the government through its LIC IPO has come up with a new quota for policyholders of the insurance behemoth who are getting a discount against the issue price band. “Policyholders have also made this company. We now invite them to be shareholders. We want to invite millions of Indians to participate in this process, as LIC unlocks its value,” said Tuhin Kanta Pandey, secretary of the Department of Investment and Public Asset Management (DIPAM).

LIC IPO Policyholders Discount

While employees and retail investors get a discount of Rs 45 each, LIC policyholders are eligible to get a discount of Rs 60 per equity share. However, this is applicable to only eligible policyholders, who linked their PAN to their LIC policy by February 28.

LIC IPO: How can Policyholders Apply?

LIC policyholders can bid a maximum of Rs 2 lakh under their quota, where the government has allocated nearly 10 per cent of the total share.

“Bids by eligible policyholders may be made at cut-off price…only those bids, which are received at or above the offer price, net of the policyholder discount would be considered for allocation under this portion,” the red herring prospectus of the LIC reads.

Those who have group policies will not be able to bid under this quota, while all other policies are eligible to qualify for the same. Apart from linking PAN with LIC policy, eligible investors also need to have a demat account. One can use online banking apps or depository platforms like Groww, Zerodha and Upstox to apply for the issue.

LIC IPO: Should You Buy?

Geojit Financial Services: At the upper price band of Rs.949, LIC is available at P/EVPS (Embedded Value Per Share) of 1.1x which is at a discount of 65 per cent compared to the average valuation of private life insurance players. Even though headwinds like declining market share, lower short-term persistency ratios and sub-par margins demand a discount to private players, the current valuation is attractive considering its strong market presence, improvement in profitability due to changes in surplus distribution norms. Hence, we assign a “Subscribe” rating on a short to medium term basis.

The LIC IPO is expected to list on the bourses on May 17.

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