Subscriptions for LIC IPO open: Everything you need to know
Subscription for the Initial Public Offering (IPO) of India's insurance behemoth Life Insurance Corporation (LIC) has opened today. The bidding will remain open for the general public till May 9. The price band for the IPO is fixed between Rs. 902-949. The government plans to forego a 3.5% stake and targets to raise Rs. 21,000 crore through this public offering.
- In India, LIC is synonymous with insurance. The insurance giant is the latest to be part of the government's disinvestment policy.
- Considering India's uncharted insurance market, this presents investors with a valuable opportunity. Add to that LIC's brand value and we have a golden goose.
- India's largest IPO yet has invited very positive reactions from the market and analysts alike.
The price band for LIC's IPO is fixed at Rs. 902-949. A discount of Rs. 60 and Rs. 45 can be availed by policyholders and LIC employees, respectively. Application for the IPO is in lots, with one lot containing 15 shares. A minimum of one and a maximum of 14 lots are available. The minimum amount required to apply is Rs. 14,235.
As part of the IPO, the government is offering 3.5% of its holding in LIC, which is equivalent to 221.37 million shares. This is in contrast to the 5% listed in the previous Draft Red Herring Prospectus. The reduction in shares on offer is due to volatility in the market. The government aims to raise Rs. 21,008.48 crore from the IPO.
LIC's IPO has attracted great interest from investors as the 5,630 crore anchor book of the company was oversubscribed. The shares went to the anchor investors at the upper ceiling (Rs. 949) of the price band. Domestic mutual funds contributed over Rs. 4,000 crore. Earlier today, the LIC shares commanded a 9% premium over its upper price band in the grey market.
The LIC IPO is priced attractively due to the government slashing its valuation. At the upper price band, its embedded value per share is 1.1x compared to 2.5-4x of private insurers. Being India's largest asset manager, LIC has a diverse portfolio. Therefore, by applying for the IPO, you can have diversification through a single investment. LIC is expected to be a dividend-paying stock.