Most brokerage firms are suggesting to subscribe to the LIC IPO, though some have raised concerns over a loss of market shares. Here is what some brokerages are making of the LIC IPO.
At the upper price band of Rs.949, LIC is available at P/EVPS (Embedded Value Per Share) of 1.1x which is at a discount of 65% compared to the average valuation of private life insurance players. Even though headwinds like declining market share, lower short-term persistency ratios and sub-par margins demand a discount to private players, the current valuation is attractive considering its strong market presence, improvement in profitability due to changes in surplus distribution norms and strong sector growth outlook. Hence, we assign a "SUBSCRIBE" rating on a short to medium term basis.
LIC is a market leader in the Indian life insurance industry with a strong distribution network and diversified product suite. The embedded value for LIC as of September 30, 2021, was at Rs 5.4 lakh crore. It has flagged concerns including adverse variation in persistence metrics which could have a material adverse effect on financial condition and interest rate fluctuations, and volatility in the capital markets may also adversely affect profitability.
LIC operates through 2048 branches, 113 divisional offices, and 1,554 satellite offices. LIC also operates globally in Fiji, Mauritius, Bangladesh, Nepal, Singapore, Sri Lanka, UAE, Bahrain, Qatar, Kuwait, and the United Kingdom. LIC is a part insurance and part investment products company. Their plans are a combination of insurance and investment with a guaranteed return. At this level of premium, life insurance as a proportion of GDP is projected to reach 3.8 per cent by FY26, up from 3.2 per cent in FY21.