Awaited LIC IPO coming at the wrong time, will it be disaster?

Ground Report | New Delhi: LIC IPO; The IPO is expected to be the biggest to date with an issue of size 5% of its total equity with the motto “People’s money for people's welfare”. It is expected to become the largest company in the Indian Stock Market by market cap on the listing.

The Government of India has already issued a notification giving effect to the 27 amendments to Life Insurance Corporation Act, 1956 but nourishing the sapling to a colossus with Rs 39.6 trillion ($525 billion) in assets under management

 which has been passed in the Budget session along with the Finance Bill.  The LIC IPO alone is expected to raise between $8 billion and $10 billion.

LIC is the largest insurer in India with a market share of-

• 64.1% in the terms of premiums 
• 74.6% in the terms of the number of individual policies issued 
• 81.1% in the terms of the number of group policies issued

In the financial year 2021, there are a total of 37.29 crore policyholder

“I can see after the announcement, the reception, there is a buzz in the air,” Finance Minister Nirmala Sitharaman told a media briefing.

The critics of the government say that the government should reconsider the IPO’s timing. The IPO filing puts the government on track to complete the LIC listing before the end of March, meaning it may coincide with a downturn in India’s stock market and higher interest rates. 

On Monday, the benchmark Bombay Stock Exchange index fell by around 3% to 56,405.84 points, the biggest single-day drop in nearly a year, as rising tensions between Russia and the U.S. over Ukraine alarmed investors. Since hitting a peak of 62,156 points on Oct. 19 last year, the index is down 9.3%.

Analyst at Wright Research, a stock investment advisory  Sonam Srivastava says, “If you look at the global picture, the Fed rate hike is spooking liquidity, and IPO has a significant chance of suffering because of that.”

 “The timing of the IPO really surprises me because they could have postponed it…LIC is such a big-ticket company,” says Biswajit Dhar, professor of economics at New Delhi’s Jawaharlal Nehru University. “They should have waited for a while and let events like the Federal Reserve interest rate rise to pass.”

Head of investment products at Prabhudas Lilladher, a stock brokerage. If market volatility continues the same through March, the government may have to lower LIC’s issue price to attract investors, which would reduce its haul from the IPO, says Piyush Nagda,

LIC would not be the first record Indian IPO to disappoint. In November, Indian digital payments firm Paytm raised $2.4 billion in its listing, India’s largest at the time, but shares have lost over 60% of their value since debuting. 

If we focus on net profit on the sale of investment from April to September FY21- 16,257.95 crore and FY22- 23146.29 crores. Profit of tax is 1,436.29 crore in comparison of State Bank of India the net profit is almost 5 crore (compared from screener)

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