Wednesday, November 23, 2022
HomeMutual FundIs it value investing in LIC (Life Insurance coverage Company of India)...

Is it value investing in LIC (Life Insurance coverage Company of India) IPO? – myMoneySage Weblog

Life Insurance coverage Company of India integrated on September 1, 1956, below the LIC Act by merging and nationalizing 245 personal life insurance coverage firms in India, is the biggest life insurer in India, with a 61.6% market share by way of premiums, 61.4% market share by way of New Enterprise Premium, 71.8% market share by way of the variety of particular person insurance policies issued, an 88.8% market share by way of the variety of group insurance policies issued for Fiscal 2021. LIC is the biggest asset supervisor in India as of December 31, 2021, with an AUM of Rs. 40.1 trillion, on a standalone foundation which is 1.1 occasions all the Indian mutual fund business’s AUM. Additionally it is ranked fifth globally by life insurance coverage GWP and tenth globally by way of complete property as of March 31, 2021.

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The first distribution channel for a person enterprise is the company, which accounted for 96.2% of NBP for particular person merchandise as of Dec 2021 and LIC’s agent workforce accounted for 55% of the full business agent rely they usually have very excessive productiveness (NBP of Rs. 412,934) when in comparison with brokers of different insurance coverage firms (NBP of Rs. 124,892).

Promoters & Shareholding:

The President of India, appearing by way of the Ministry of Finance, Authorities of India is the corporate promoter.

Public Challenge Particulars:

Supply on the market: OFS of approx. 221,374,920 fairness shares of Rs. 10 aggregating as much as Rs. 21,008.48 Cr. (As per SEBI itemizing pointers, the federal government should mandatorily dilute its LIC stake to permit public shareholding of 10% inside 2 years and 25% inside 5 years, guaranteeing fixed provide if demand persists)

Whole IPO Dimension: Rs. 21,008.48 Cr.

Value band: Rs. 902 – Rs. 949.

Goal: To hold out a proposal on the market of about 3.5% of the shares and to get the advantages of itemizing on the inventory alternate.

Bid qty: minimal of 14 shares (1 lot) for Rs. 14,235 and most of 14 tons.

Supply interval: 4th Might 2022 – 9th Might 2022.

Date of itemizing: 17th Might 2022.


  • The most important life insurer in India.
  • LIC can be the biggest institutional investor in Indian markets.
  • Trusted model and a customer-centric enterprise mannequin, the model ‘LIC’ was acknowledged because the third strongest and tenth most precious international insurance coverage model in 2021.
  • Dependable threat administration framework.
  • Various product portfolio.
  • Omni-channel distribution community with an unparalleled company pressure.
  • Skilled and skilled administration group.


  • Regardless that LIC is the biggest life insurer with a market share of ~43%, it has been dropping market share to personal gamers, and its weighted obtained premium progress has slowed and been decrease than personal friends’ in recent times.
  • LIC relies upon closely on the company channel (93.8%).
  • Particular person NBP has declined 10% YoY.
  • Decrease attractiveness of recalibrated par merchandise since PAR dominated LIC’s product combine with a ~65% share in FY21.
  • Greater surrenders and decrease persistencies.
  • LIC’s complete price ratios stood at 33% in 1HFY22 which is greater than the highest 5 personal sector friends which have a median of 19% complete price ratio.

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Sectorial outlook – India is the Fifth Largest Insurance coverage Market in Asia and Has Exhibited Constant Development in Insurance coverage Premiums. The scale of the Indian life insurance coverage business was Rs. 6.2 trillion primarily based on complete premium in Fiscal 2021, up from Rs. 5.7 trillion in Fiscal 2020. The business’s complete premium has grown at 11% CAGR within the final 5 years ending in Fiscal 2021. New enterprise premiums (NBP) grew at 15% CAGR throughout Fiscals 2016 to 2021, to roughly Rs. 2.78 trillion. In truth, in Fiscal 2021 – a 12 months impacted by the COVID- 19 pandemic, the NBP of the business rose by 7.5% even with this excessive progress within the insurance coverage sectors, the Indian market remains to be largely underinsured in comparison with main economies and because of the greater share of financial savings than safety in life insurance coverage premiums, the precise safety offered by insurance coverage in India can be a lot decrease in contrast with even different growing markets so the potential for this sector nonetheless stays excessive for the foreseeable future and we count on the profitability of life insurance coverage firms, typically, to additional enhance.

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The financials (income and internet revenue) are proven within the graph beneath:

Valuation – For the final 3 years common EPS is Rs. 4.47 and the P/E is round 212x on the higher worth band of Rs. 949. The EPS for FY21 is Rs. 4.70 and the P/E is round 201x and if we annualize FY22 earnings then the asking worth is at a P/E of 350x. SBI Life (P/E 71), HDFC Life (P/E 101), and ICICI Prudential (P/E 99) are its listed friends as per the RHP. The corporate’s P/E is between 201x and 350x nonetheless it isn’t actually comparable on an apple to apple foundation with its friends in P/E and looking out on the embedded worth LIC’s 1.1 is profitable pricing when in comparison with its friends therefore contemplating all of the elements the itemizing appears to be absolutely priced.

Discounted worth: There’s a low cost of Rs. 60 for LIC policyholders. and Rs. 45 for Retail and staff.

Advice – LIC is the biggest Insurer and largest asset supervisor in India and its itemizing will broaden the investible universe and additional show to be structurally constructive for the sector in the long term as given its attain and measurement elevate the sector’s relevance in investor’s portfolio however since LIC is principally financial savings dominated (product combine) and agency-driven, growing demand for defense merchandise will trigger it to lose market share additional though some granular steps in a special route would possibly begin to preserve its relevance and enhance profitability and because of a low presence in ULIPs, which shaped about 20% of the insurance coverage business’s new enterprise by way of WRP in FY21 won’t entice traders searching for returns.

So there are lots of questions concerning its enterprise and its profitability sooner or later in comparison with Non-public insurers have a extra balanced product combine which is gaining popularity, after contemplating all of the above elements the itemizing although appears moderately priced we might suggest traders to “Keep away from” from a long run perspective, to not undermine the truth that traders with a brief time period outlook could make some itemizing beneficial properties.


This text shouldn’t be construed as funding advise, please seek the advice of your Funding Adviser earlier than making any sound funding determination. Should you shouldn’t have one go to

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