The most awaited and the expected biggest IPO in the Indian Stock Market of Life Insurance Corporation of India (LIC) is expected to hit the capital market very soon. What will be the IPO Size, will it be the company with the largest market capitalization post-listing, and which stock should investors keep on their radar before the arrival of LIC IPO, let’s talk more about this all in this article as we move forward.
India’s Largest Public Issue by LIC:
- It is expected the Initial Public Offer of Life Insurance Corporation of India (LIC) will be the biggest company in the Indian Stock Market with the largest market capitalization.
- First of all, we will discuss the Embedded Value and the current market capitalization of the other listed life insurers company.
- Firstly, the Embedded Value of HDFC Life at the FY21 end was Rs. 26,617 Cr. On that particular embedded value, the market capitalization, that was around Rs. 1.4 Lakh Cr. which accounts for 4 times the embedded value of the company.
- Then, coming to SBI Life, its embedded value at the end of FY21 was Rs. 33,390 Cr. more than the HDFC Life embedded value. But the market capitalization of SBI Life was Rs. 1.15 Lakh Cr. at the embedded value which was just 3-3.5 times the embedded value of the company.
- ICICI Prudential Life Insurance was having an embedded value of Rs. 29,106 Cr. at the end of FY21 and its market capitalization stood at Rs. 90,000 Cr. Here, the market capitalization of ICICI Pru Life was almost 3 times the embedded value of the corporate in FY21 end.
- Here, if we say a word about the Premium Valuation to Normal Valuation, then around 3-4.5 times of the valuation was being received to these life insurance companies at FY21 end.
- Moving ahead, the Department of Investment and Public Asset Management (DIPAM) has given the embedded value of LIC of over Rs. 5 Lakh Cr. Rs. 5.40 Lakh Cr. to be specific. Here, from the least valuations to the higher valuations multiples of the listed life insurance companies to their embedded value, then it comes around Rs. 15 Lakh Cr. to Rs. 21 Lakh Cr.
- If the highest multiples are received by LIC i.e., Rs. 21 Lakh Cr. then it will the highest valued companies, but it is unlikely to happen so.
- But if LIC gets 3 times multiples to its embedded value then it can become the second largest valued company in terms of market capitalization.
- As per the news reports, the IPO size of LIC could be in the range of Rs. 50,000 Cr.
- In the recent past, there is a volatility ride in the stock market currently due to the rising interest rate possibility scenario. Also, the biggest IPO of the country till now- Paytm which came in 2021 did not have a blockbuster listing, and concerns of IPO valuation started rising post its listing. Hence, Government will not take any chance here. In FY21, the government has missed its Disinvestment target by a large figure.
- Earlier, there were plans of bringing LIC IPO worth Rs. 1 Lakh Cr. which now brought down to Rs. 50,000 Cr. looking at the current scenario in the market. Here, the market capitalization of LIC can hover around Rs. 10 Lakh Cr.
Impact on Listed Life Insurance Companies:
- If LIC IPO comes at a size of Rs. 50,000 Cr. and an estimated market capitalization of Rs. 10 Lakh Cr. then it will surely impact the currently listed players in Life Insurance Space.
- The Listed players are currently trading in between the Least multiples to the higher multiples, then rationalization of these multiples could be there.
LIC IPO Details:
- LIC filed the Draft Red Herring Prospectus (DRHP) on February 13, 2022, where it was stated that it will be offering around 31.62 Cr. Shares.
- As of September 2021, LIC is having an Asset Under Management (AUM) of Rs. 39.6 Lakh Cr.
- LIC IPO will be purely an offer for sale (OFS) of about 5% of the company’s equity by the Government of India (GoI).
- The IPO Issue size could be around Rs. 53,500 Cr. to Rs. 93,625 Cr., and the issue price could be around Rs. 1,693- Rs. 2,962 per share.
1 Stock to Keep in Radar prior LIC IPO arrives:
Firstly, LIC will be providing a 5% discount in its IPO to the LIC Policyholders. 10% of the IPO will be reserved for policyholders. Here, to apply for an IPO, a policyholder will need to have a Demat Account under its name.
If we give a general look at the figures of policyholders of LIC, then it is more than 30 Cr. mark and as per the latest data, the total Demat account in India is around the figure of 8 Cr.
Here, in the context of new additions of the Demat Account, CDSL holds around 70%-75% market share.
Now, if the policyholders of LIC steps forward to open a Demat Account to apply in the IPO, then it will be surely a great opportunity for CDSL as largely the new account openings can come from the way of discount brokerage houses which takes the services of CDSL.
Disclaimer: The information here is provided for reference purposes only and should not be misconstrued as investment advice. Under no circumstances does this information represent are commendation to buy or sell stocks or MF.
Originally Published On: https://blog.investyadnya.in/what-will-be-the-size-of-lic-ipo/