Is the LIC IPO worth it?

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India’s most awaited Initial Public Offering has hit the floors today. That means, you will be able to buy the LIC stakes and the closing date will be 9th of May. The government through this IPO is expecting to raise around INR 21, 000 Crore.

A Noida-based Private equity Analyst and Investment banker, Ruby Gupta says that there is a chance of oversubscription in LIC IPO. According to her,  whenever the price band of an IPO lies between 900 to 949, it is observed that the chances of oversubscription occurs.

On asking her views on LIC IPO, Ruby says, ‘If a Retail investor wants to invest, then he will need to do his calculations about how much he want to bound his money in LIC IPO as we know that the price ending ratio of LIC stakes are quite expensive.’

The market is witnessing multiple flows due to the world scenario and global politics. As we know, the market valuation is 6 lakhs on contrary the estimated valuation in the past was 30 Lakhs. 

The government’s plan to introduce LIC IPO can save the organization from the losses. The state-run insurer, LICs final IPO documents filed with the Securities and Exchange Board of India revealed that the organization is sitting on a mark-to-market loss of ₹6,028 crore that has to accounted for in its income statement by 31 January,.

As per the estimation, it is expected that the government will be able to extract 2 thousand 5 hundred 57 crores from the market for their further development to deal in the market.

Whether it should be purchased?

Ruby says, ‘As per retail investor, somebody wants to invest so he need to do his calculations. For them, i think it is expensive as per plea and there are many other stocks available that they can consider to buy.’

The good side of LIC IPO 

This is the first time when a company has thought of their customers in the IPO deals. If you see that the companies who brought IPOs in the past has not sought anything for their customers whereas LIC has brought up a concept where, except 40% for their employees, they got 60% discounts for the policyholders (or Customers). That makes it the first time where a company is giving benefits to their customers. 

LIC Oversubscription

I believe almost every Indian home has at least one LIC membership, so their market is already captured and they already have their market of employees and policyholders. 

As per Ruby, ‘Publicly, the bookings of HNI (high net-worth individuals) clients will also be accepted and the retail investors will not actively participate in the offering due to the expensive price band.’

Concluding her words, ruby says, ‘The good side of LIC IPO is that LIC is the government company and the risk percentage is very less with them and that makes it a safe investment. So, in general if people are looking for the safer side in terms of investment for a long term then they will be saying YES to the LIC IPO.’

Important Dates:

IPO Open DateMay 4, 2022
Closing DateMay 9, 2022
AllotmentMay 12, 2022
Initiation of RefundsMay 13, 2022
Credit of stakes to the Demat accountMay 16, 2022
IPO listing dateMay 17, 2022
UPI mandate expiry dateMay 10, 2022

As per reports, the Insurance industry will reach INR 12,40,000 crore by 2026. Amid this, the famous demat and trading app, Sharekhan has come up with a Limited period offer for new accounts opened during the LIC IPO under which the users will not have AMC for 3 years and get 60-day brokerage free trading.

You will be able to buy the LIC stakes from your Paytm app too. The bid dates spans from 4 May  to 9 May with a lot size of 15. That means that 1 lot has 15 shares and investors can bid for a maximum of 14 lots or an amount not exceeding Rs 2 lakh.

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