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The author is a practising chartered accountant and an independent director on many large public companies whose views and ideas have been instrumental in framing policyMore From The Author >>
The LIC Advantage: Ahead Of All Competitors
The intrinsic and embedded value of the LIC would be far higher than the IPO pricing as it is still far ahead of its competitors, writes S Ravi
Photo Credit : Reuters
The Life Insurance Corporation of India (LIC) IPO is a major step taken by the government. LIC is among the major investors in several listed companies in the country. Its strength lies in the network of approximately 13 Lakh agents and distribution. LIC has Rs 40 Lakh crore assets under management and has a dominant market share of 75 per cent in individual policies. The total assets under management (AUM) of all insurance companies put together are approximately Rs 50 Lakh crores.
More Than Known
Investors need to know that LIC is among the largest owners of properties that have been acquired three to four decades ago, mostly located at strategic locations. The intrinsic and embedded value of the LIC would be far higher than the IPO pricing as it is still far ahead of its competitors.
Insurance companies were badly impacted by Covid 19 claims. LIC with its pedigree could withstand that. LIC is the largest life insurer in India and the fifth largest globally. It beats competitors as it had the distinct advantage of being the single insurer till private players were issued licences. There are 24 life insurance companies in India but LIC stands out. Private insurers did grow in the last five years but were severely impacted by the pandemic.
Also, LIC is a major shareholder in the housing finance, mutual fund and other companies promoted by the institution itself. It has strategic investments in many banks such as IDBI in addition to the BSE and NSE as well.
A Good Bet
Investors must see the IPO from a different perspective. We have recently witnessed IPOs of companies that did not even have profits and wagered on future profitability. The IPO will have anchor investors, Foreign Institutional Investors (FIIs), global funds, mutual funds, retail investors and policyholders.
Large and reputed anchor investors have evinced interest in the IPO which clearly testifies the confidence in the institution. Considering the fact that issuance would be to the extent of Rs 21000 crore, the initial selling pressure especially by speculators would be high.
The LIC stock is a good medium to long term investment considering the brand, market depth and being a very significant player in the sector. LIC shares can be considered an investment that will be valuable, safe and liquid. Investors can safely bet on the LIC stock for good returns over a period of time and with a longer horizon.