The wait for investors is finally over as the launch dates of the biggest-ever IPO in India are out. The Initial Public Offering of the Life Insurance Corporation (LIC) of India is expected to hit the stock markets on 4 May 2022.
LIC IPO
The LIC IPO was scheduled to be launched in March 2022. However, the ongoing war between Ukraine and Russia led to its postponement. Although the bidding dates and share allotment dates are yet to be announced by the company, the excitement for this IPO is high among investors from all across the globe. Continue reading to know five reasons why you should apply for the LIC IPO.
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#1 It is expected to be the biggest-ever IPO in India
If all goes well, the LIC IPO can become the biggest-ever IPO in India to date, surpassing PayTM’s IPO, which was launched last year. According to the latest data, the government of India (which holds a 100% stake in the LIC) is planning to raise approximately Rs. 21,000 crore from the LIC IPO by selling a 3.5% stake in the company.
Although this is a decline from the previous estimate of the sale of a 5% stake in the company, the IPO valuation still remains the strongest to date. It would surpass the PayTM IPO, which is currently the largest Indian IPO with a valuation of Rs. 18,300 crore. Applying for this IPO can provide you with an opportunity to be a part of this euphoria.
#2 LIC is the largest life insurance company in India
The issuing company of this IPO is the Life Insurance Corporation of India or LIC, which is the largest life insurance company in India and the fifth-largest life insurance company globally.
As per the Draft Red Herring Prospectus (DRHP), the embedded value of the LIC is approximately Rs. 5.4 lakh crore. However, going by the government’s estimates of a 3.5% stake worth Rs. 21,000 crore, the company’s valuation could turn out to be more than Rs. 6 lakh crore.
The LIC has a giant market share of 66.2% in India in terms of new business premium and 74.6% in terms of the number of individual policies issued. It also has a significant global presence with the total Assets Under Management (AUM) worth Rs. 31 lakh crore. LIC is also the largest institutional investor in India with a total investment of approximately Rs. 120 lakh crore.
In terms of market capitalisation, LIC could become third in India after the launch of its IPO. Applying for this IPO could allow you to claim a stake in a company with such a gigantic stature.
#3 It could provide a boost to the economy
India’s economy continues to grapple after the prolonged slowdown owing to the COVID-19 pandemic. We’ve already seen the worst recession period since independence in the past two years. The government’s effort to curb the spread of the deadly virus pushed many Indians into poverty and joblessness.
So, in a bid to revive the economy, the government has turned towards privatisation. The dilution of the stake in the LIC is one such move that could provide a big boost to the struggling economy. And you should become a part of this growth.
#4 High growth prospects for the company
Despite concentrated efforts by the government to increase life insurance penetration in India, a huge chunk of the population remains uninsured. The insurance premium to GDP ratio in India is currently at 3.7%, well below the global average of 7.23%.
It means that there is a huge scope for business for insurance companies in India. Moreover, being the market leader, LIC can provide a huge impetus to achieve this growth. The prospects for the company seem too bright at the moment.
#5 High chances of allotment
If you’re fed up after applying for many IPOs only to know that you’ve not been allotted any shares, you should apply for the LIC IPO. Since this IPO consists of very large issue size, the chances are high that you would be allotted at least one lot of shares.
As per the DRHP filed by the LIC with the Securities and Exchange Board of India (SEBI), the IPO could consist of 31,62,49,885 equity shares.
To conclude
In the stock market ecosystem, the LIC’s IPO is touted as the “Mother of all IPOs”. It provides you with a strong reason to apply for this IPO. At the same time, you should be aware of its risks and challenges.
If you want to apply for the LIC IPO, you can open a demat account with ICICIdirect. You can also choose your brokerage structure as per your specific requirements.
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