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Friday, December 2, 2022

LIC IPO expected to deliver mild listing gains

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Life Insurance Corporation’s (LIC) initial public offering (IPO) is still attracting retail investors. The issue is receiving positive feedback and is likely to result in mild listing gains.

Life Insurance Corporation’s (LIC) initial public offering (IPO) continues to attract retail investors, including workers and policyholders, who are among the top bidders for the issue thus far. LIC remains appealing despite dropping premiums in the grey market, an extreme selloff in global markets, rate rise concerns, and inflationary concerns.

According to the majority of market analysts, LIC is a long-term play, and investors should bid for the issue based on their money and risk tolerance. However, one should not wager on issues just for the sake of listing profits.

According to VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, listing gains in LIC are conceivable because valuation is favourable. Vijayakumar said the medium-term prospects are similarly favorable.

Religare Broking, VP Research, Ajit Mishra, agreed and stated that huge issues are not for listing gains. Long-term investments should be made in solid firms, and LIC is one of them.

Mishra added, “If their funds allow it, investors should go all in on the issue, notwithstanding market pessimism, because values favor the insurance behemoth.”

The government has assigned a value of Rs 6 lakh crore to LIC, which is 1.12 times its embedded value (EV) of Rs 5.4 lakh crore.

Embedded value is a measure of an insurance company’s consolidated shareholders’ worth.

According to Santosh Meena, Head of Research at Swastika Investmart, the values of LIC are lower than those of its public counterparts.

“Investors must recognize that insurance is a long-term industry, and this issue is only a long-term play.”

Other analysts, however, are doubtful about the issue owing to present market conditions and the company’s poor profitability, which may reduce its appeal in comparison to peers.

According to analysts, the broader markets are experiencing a much-needed healthy correction, and investors should try to purchase the dips. The danger, though, is that the present cycle of correction is not done.

Some analysts warn investors to be wary of the LIC issue. They argue that given the current market attitude, investors should not go all guns blazing. One should subscribe to the issue based on their risk tolerance.

According to Astha Jain, Senior Research Analyst at Hem Securities, the issue is receiving positive feedback and is projected to produce modest listing gains. However, investors should temper their expectations in the face of the ongoing slump.

“We encourage that investors bid for LIC, but keep in mind their risk tolerance because market conditions are not as tempting as they were earlier.”

Previously, the government was anticipated to value the insurance behemoth at Rs 12 to 13 lakh crore, but global volatility hampered those plans.

On the condition of anonymity, a fund manager stated that LIC can only benefit investors if the business focuses on profitability.

He continued, “The government must sell its remaining interest, which may be a difficult challenge if profitability does not improve. However, if the data come in on the positive side, the street may be ready to offer it a premium price above rivals.”

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