LIC IPO

SET TO CREATE MULTIBAGGER WEALTH FOR INVESTORS? State-owned insurance group and investment company, Life Insurance Corporation of India (LIC), last week, filed a draft red herring prospectus (DRHP) with the Securities and Exchange Board of India (Sebi) to raise funds via an initial public offering (IPO). The IPO consists of an offer for sale of up to 316.25 million shares by the Government of India. The LIC IPO is likely to be the biggest IPO in India till date. The initial public offering of over 31.6 crore shares or five per cent of the government’s stake is likely to hit the D-street in March and employees and policy holders of the insurance behemoth would get a discount over the floor price. As per the prospectus, employees and policyholders of the country’s largest insurer will be getting a discount over the floor price. The portion planned to be reserved for policyholders can go up to maximum of 10 per cent. “The aggregate of reservations for eligible policyholders shall not exceed 10 per cent of the offer size," the DRHP stated. Employee quota will be capped at 5 per cent. To invest in the much-awaited LIC IPO, policyholders must have two things: policyholder’s PAN should be updated on the LIC portal, policyholder should have a demat account. The quantum of potential discount will be specified closer to the bid opening date, at least two working days prior. The policyholders’ quota in the IPO – a first-of-its-kind – was created after the central government permitted LIC to designate policyholders as one of the reserved categories, as per an amendment made last year to the LIC Act, 1956. LIC has reported a profit after tax of Rs 1,437 crore for the first half of the financial year 2021-22 as compared with Rs 6.14 crore in the year-ago period. Its new business premium growth rate stood at 554.1per cent in H1FY22, compared with 394.76 per cent during the corresponding period of the preceding financial year. According to the DRHP, the embedded value has been set at Rs 5.39 trillion. Usually, the companies trade at around 3-4 times the EV. The government has notified that it will sell 5 per cent of the total capital in the form of shares. So, it will retain a 95 per cent stake in the company. LIC was formed on September 1, 1956, by merging and nationalizing 245 life insurance companies in India, with an initial capital of Rs 5 crore. Even as a lot of private life insurers have arrived at the scene, LIC continues to be the dominant life insurer. Biggest Indian Investor - LIC is a company that itself has a large number of investments. In the 2021 fiscal year alone, it has bought Rs. 90,000 crore worth of shares in other companies.  Noteworthy Investees - LIC holdings in other major Indian companies include 8.11% in Canara Bank, 2.13% in Birla Capital, 2.68% in Reliance Infrastructure, 4.80% in Bank of Baroda, 5.96% in PTC India Ltd., and many substantial others.  Government Dilution - The Indian government will dilute a stake of 5% in the LIC IPO due out in March 2022, and plans to raise around Rs. 75,000 crore to Rs. 1 lakh crore from this disinvestment.  Market Share - The main point in this technical analysis of LIC is the fact that, at present, and for numerous years, LIC is the only public sector undertaking (PSU) in the sector of insurance to hold a majority position. It has the majority market share, even though a massive amount of private insurers have entered the market. Its market share in the insurance segment stands at about 70%.  Technically acknowledged to be a sound investment, it's a good idea to invest in the LIC IPO. Based on the parameters of market share, and its capital and profit, you may go ahead and subscribe, expecting good gains Keywords: DRHP,PSU, Policyholders, dilution, Offer for sale