LIC IPO may value firm at about Rs 15 lakh crore; expensive or cheap? Here’s what experts say – Financial Express
Life Insurance Corporation of India (LIC) filed its IPO papers with the capital market regulator SEBI, to launch India’s largest public issue.
Life Insurance Corporation of India (LIC) filed its IPO papers with the capital market regulator SEBI, to launch India’s largest public issue. LIC’s embedded value as on September 30, 2021 has been estimated at 5.4 lakh crore. The similar listed insurance companies trade at a multiple of 2.5-4 times embedded value. “Taking an average of above number and applying to LIC EV, the market capitalization of India’s largest life insurance company could be between Rs 15-16 lakh crore,” Narendra Solanki, Head – Equity Research (Fundamental), Anand Rathi Shares & Stock Brokers, told Financial Express Online. At this IPO price, Solanki finds LIC IPO price neither expensive nor very cheap.
Solanki also added that if shareholding remains same as mentioned in Draft Red Herring Prospectus (DRHP) and issue is fully OFS, then ‘at Rs 15 lakh crore market capitalisation, issue price comes at about Rs 2,370 per share’. The public issue may help the government reach its revised divestment target of Rs 78,000 crore, cut down from the initial target of Rs 1.75 lakh crore for the current fiscal.
What should investors do when the LIC IPO opens?
LIC’s market share in India is unparalleled globally, with no other life insurance player in any other country enjoying such a large market share, LIC said in its DRHP. “Considering the largest insurance company in India is valued at Rs 13 lakh crore, even a price band of around 1700-2100 makes it quite an expensive buy,” AR Ramachandran, Co-founder & Trainer, Tips2Trades, told Financial Express Online. Ramachandran said that this IPO is likely to attract a lot of participation and hence investors can expect a premium listing. “However, allotted investors are also advised to book profits on listing gains as private players like HDFC Life, ICICI Prudential Life, even general insurance giant ICICI Lombard look more attractive at this point from a long term perspective,” AR Ramachandran advised.
LIC’s already listed peers
LIC’s IPO is expected to hit the street before the end of this fiscal year. Upon successful listing on the stock exchanges, LIC would join the likes of SBI Life Insurance Company, HDFC Life Insurance Company, and ICICI Prudential Life Insurance Company. LIC has the highest RoE, the amount of net profit earned as a percentage of shareholder equity, amongst the global peers. In Fiscal 2021, LIC had the highest RoE of 82% amongst its peers, followed by Ping An Insurance (19.5%), Aviva PLC (14.8%) and China Life Insurance (11.9%).
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