Investors Need To Know These Pitfalls Before Investing

Even because the LIC IPO is all set to hit the market subsequent week, the much-awaited provide has all the time been within the limelight as a result of its sheer measurement and the corporate’s enormous market share within the life insurance coverage section. Although most analysts have given the ‘subscribe’ ranking to the difficulty, some are additionally cautioning them concerning the pitfalls earlier than investing within the IPO.

Samco Securities, Religare Broking, Anand Rathi, and Marwadi Financial Services have given the ‘subscribe’ ranking to the state-owned insurance coverage behemoth’s IPO. However, there are some warning factors that buyers want to bear in mind.

Life Insurance Corporation (LIC) doesn’t have a powerful digital presence and virtually all of its insurance policies are offered by means of brokers. According to the corporate’s draft papers, solely 36 per cent of particular person renewal premiums are collected digitally, in contrast with over 90 per cent for personal gamers. Analysts stated that if this development continues, the overall value for LIC is more likely to enhance, going ahead.

LIC’s worth of recent enterprise (VNB) margin is low as in comparison with its personal sector friends. The state-owned insurer’s VNB as of September 2021 stood at 9.9 per cent, whereas its friends ICICI Prudential Life, HDFC Life, SBI Life, Bajaj Allianz Life and Max Life reported the VNB margin within the vary of 11-27 per cent.

Life Insurance Corporation has a market share of 64 per cent when it comes to complete life insurance coverage premiums. However, it has been dropping the market share to its personal friends. The state-owned insurer grew at a compound annual development charge (CAGR) of 9 per cent between 2015-16 and 2020-21, whereas personal insurers witnessed a development of 18 per cent throughout the identical interval.

LIC IPO: Date, Size, Quota

The preliminary public providing, which can open for the general public and policyholders on May 4 and proceed until May 9, has a value band of Rs 902-Rs 949 per fairness share. It could have a Rs 60 per fairness share low cost for policyholders and a Rs 45 low cost for workers and retail buyers. The share allotment is more likely to be achieved on May 12 and its itemizing will happen on May 17.

The IPO is anticipated to garner as much as Rs 21,000 crore. Its valuation stands at Rs 6,00,000 crore, which is 1.11 instances the embedded worth of round Rs 5,40,000 crore. A bidder can put money into a minimal of 1 lot comprising 15 shares, and in multiples of 15 thereafter with a most cap of 14 tons.

Retail buyers will have the ability to take part in 35 per cent of the IPO measurement, whereas 10 per cent of the IPO shares will likely be reserved for policyholders. Qualified institutional consumers could have entry to 50 per cent of the shares. The remaining 5 per cent is reserved for non-institutional consumers.

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