The much-awaited initial public offering (IPO) of state-run Life Insurance Corporation of India (LIC) has opened for subscription today. The government aims to generate about ₹21,000 crore by diluting its 3.5% stake in the insurance behemoth. The price band has been fixed at ₹902-949 per equity share for the issue.
From a valuation standpoint, at the upper band of the issue price, LIC IPO is priced at a multiple of 1.1 embedded value, which as per analysts is at a significant discount to its listed peers as currently listed insurance companies trade at market capitalization/EV multiple of around 2.8x.
“We’ve changed our mind. This LIC IPO is just a steal at a 600,000 cr market cap. They should make about 50,000 cr. in profits in FY2023!,” said Deepak Shenoy, CEO of Capitalmind in a tweet.
The share sale is through an offer-for-sale (OFS) of up to 22.13 crore equity shares. The shares are likely to be listed on May 17. LIC has cornered a little over ₹5,627 crore from anchor investors led primarily by domestic institutions. Anchor Investors portion (5,92,96,853 equity shares) was subscribed at ₹949 per equity share.
LIC reduced its IPO size to 3.5% from 5% decided earlier due to the prevailing market condition. Even after the reduced size, the issue is going to be the biggest share sale ever in the country. So far, the amount mobilised from the IPO of Paytm in 2021 was the largest ever at ₹18,300 crore, followed by Coal India (2010) at nearly ₹15,500 crore.
As of December 2021, LIC had a market share of 61.6% in terms of premiums or GWP, 61.4% in terms of new business premium, 71.8% in terms of the number of individual policies issued, and 88.8% in terms of the number of group policies issued.