These days one thing is being searched a lot in the market, and it is about the IPO of LIC – What is the launch date of LIC IPO, what is going to be its valuation, whether you should invest in it or not, how much one should invest and if not, then why not? My Trade Logic will be discussing all this today and will do its best to address all your queries. Also, we hope that you will get all your answers by the end of this blog. So stay with us.
First of all, if we talk about the market sentiment, both global and Indian markets are running weak. So is this the right time to invest in IPOs, especially the IPO of LIC, given the government plays an equal role in these offerings as investors? The first question that arises from all this is- when the IPO of LIC will announce. See, the IPO of LIC is likely to hit public this month and will be open for anchor investors soon. Retail investors can also start investing in LIC IPO in the next few days. Although, LIC is instructing its policyholders to link their PAN cards to their policies to become eligible for LIC IPO shares.
The second point which My Trade Logic wants to let you know is what is going to be its valuation? See, the total capital you can expect is in the range of 60,000 - 80,000 crores, and with this, it will be the largest in Indian market history. A few months ago, PAYTM IPO was also issued with a valuation of 18000 crores, making it the largest IPO in the country. So, you can expect that it will shatter this record.
On the other hand, if we talk about all the big IPOs, they have failed to please the investors. If we check PAYTM, we can see that it experienced almost 50% downfall within 2-3 weeks only. So here it is also going on the back of the mind that whatever the issue price of LIC will be if it is higher, it should not replicate the PAYTM scenario here, and there should not be a significant drop from the issue price.
Invest in LIC IPO or Not?
As a result, before you invest, you should be aware of some facts, such as government control over LIC. Yes, the government has always had some control over LIC, whether it comes to finance, assignment of shares, or control over the whole system. As a result, where the government is more involved, the expansion of privatization in the freedom scenario is always a concern.
So you’ll have to evaluate if the government’s control will be more, and whether you should invest in it or not; the final decision will be yours.
The second point which My Trade Logic wants you to consider is the market participation of LIC is dwindling because, in the year 2000, when insurance privatization happened, a steady decline was seen in LIC participation. Before 2000, there was only one superpower in the policy market: LIC, followed by HDFC, SBI, ICICI. LIC shares experienced a consistent drop since the expansion of companies, which has affected the returns.
Another point to consider as per My Trade Logic is that LIC is reliant on its agents. We see most of the agents inside LIC across the country, and 94% policy conversion has become possible with the help of agents. So it could be a negative for them somewhere because they are so reliant on their agents. Also, LIC is lagging behind other insurance companies in technology-based marketing. Apart from that, the benefit of profit holders has decreased because, formerly, LIC used to distribute about 95% of its profit to its policyholders, and ultimately it divided its earnings into two divisions. A part of it goes to the policyholder while the rest goes to the investor. As a result, we will notice that there will be profit diversion to some level, which may cause misunderstanding.
Now that we have talked about the LIC IPO in detail, the rest is up to you to wait until the IPO of LIC launch day arrives because many things will become clear on that day, and perhaps we will once again see history created.
