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Life Insurance Corporation of India
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IPO Details:

IPO Opening Date

May 4, 2022

IPO Closing Date

May 9, 2022

Issue Type

Book Built Issue IPO

Face Value

₹10 per equity share

IPO Price

₹902 to ₹949 per equity share

Market Lot

15 Shares

Min & Max Order Quantity

15 & 210 Shares

Min & Max application amount

₹14,235 & ₹199,290

Listing At

BSE, NSE

Issue Size

221,374,920 Eq Shares of ₹10
(aggregating up to ₹21,008.48 Cr)

Offer for Sale

221,374,920 Eq Shares of ₹10
(aggregating up to ₹ [.] Cr)

Retail & Employee Discount

Policy Holder Discount

₹45 per equity share

₹60 per equity share

Policy Holder Reservation

22,137,492 equity share

Basis of Allotment Date

May 12, 2022

Initiation of Refunds

May 13, 2022

Credit of Shares to Demat Account

May 16, 2022

IPO Listing Date

May 17, 2022

Promoters

THE PRESIDENT OF INDIA, ACTING THROUGH THE MINISTRY OF FINANCE, GOVERNMENT OF INDIA

Retail portion

QIB

NII(HNI)

 35%

 50%

 15%

Registrar

Kfin Technologies Private Limited

 

Company Profile

LIC is the largest insurance provider company in India. It has a market share of above 66.2% in new business premium. The company offers participating insurance products and non-participating products like unit-linked insurance products, saving insurance products, term insurance products, health insurance, and annuity & pension products. LIC is a part insurance and part insurance and part investment products company.  Their plans are a combination of insurance and investment with a guaranteed return.

 

Objects of the Issue

 

The objects of the Offer are to:

(i) Achieve the benefits of listing the Equity Shares on the Stock Exchanges; and

(ii) Carry out the Offer for Sale of up to 221,374,920 Equity Shares by the Selling Shareholder (President of India, acting through the Ministry of Finance, Government of India). Further, the Corporation expects that the proposed listing of its Equity Shares will enhance their visibility and brand image as well as provide a public market for the Equity Shares in India.

The Selling Shareholder will be entitled to the entire proceeds of the Offer after deducting the Offer expenses and relevant taxes thereon. The Corporation will not receive any proceeds from the Offer.

 

 

Key Financial Summary

 

₹ Crore

As at Dec' 31

As at Mar' 31

2021

2021

2020

2019

Share Capital

6325

100

100

100

Reserves

2498.62

6705.47

891.66

798.44

Net Worth

8230.5

6514.64

854.65

815.33

Premium Earned

285341.93

405398.5

382475.52

339971.63

Income from Investments

226253.73

285520.42

242836.31

225043.54

EBITDA

1756.97

2980.35

2718.52

2642.37

Profit After Tax

1715.31

2974.14

2710.48

2627.38

EPS - Basic & Diluted

2.71

4.7

4.29

4.15

RoNW (%)

20.84%

45.65%

317.14%

322.25%

NAV

13.01

10.3

1.35

1.29

 

Product Portfolio

 

LIC has a broad and diversified product portfolio covering various segments across individual products and group products. Individual products comprise of

(i) Participating insurance products and

(ii) Non-participating products, which include

(a) Savings insurance products;

(b) Term insurance products;

(c) Health insurance products;

(d) Annuity and pension products; and

(e) Unit linked insurance products.

Individual products include specially designed ones for specific segments such as special products for women and children and micro insurance products. In addition, it offers riders that provide additional benefits along with the base product to cover for additional risks such as accidental disability, death, critical illness and premium waiver on the death of the proposer. Its individual product portfolio in India comprises of 32 individual products (16 participating and 16 non-participating ones) and 7 individual riders.

 

Group products comprise of

(i) Group term insurance products,

(ii) Group savings insurance products;

(iii) Group savings pension products; and

(iv) Group annuity products. Its group product portfolio in India comprises of 11 group products.

 

Industry Overview

 

Based on life insurance premium, India is the tenth largest life insurance market in the world and the fifth largest in Asia, as per Swiss Re. The size of the Indian life insurance industry was  6.2 lakh crore based on total premium in FY21, up from ` 5.7 lakh crore in FY20.

The industry’s total premium has grown at 11% CAGR in the last five years ending in FY21. New business premiums (NBP) grew at 15% CAGR in FY16-21 to ` 2.78 lakh crore. In FY21 – a year impacted by the Covid- 19 pandemic, the NBP of the industry rose 7.5%.  Within NBP, group business premium grew at ~15.4% CAGR in FY16-21, whereas individual premium rose ~14% CAGR during the same period.

 

 

Listed Peer Comparison

 

Particulars (₹ Cr)

LIC

HDFC Life

SBI Life

ICICI Prudential

AUM

3676180

173839

229870

214218

Total premium

403290

38580

50250

35730

NBP / Employee

1.6

1

1.2

0.9

Net Profit

2974.1

1360

1460

960.2

EV

95605

26617

33390

29106

VNB

4167

2185

2330

1621

VNB Margin %

9.9

26.1

23.2

25.1

Opex Ratio %

8.7

11.9

4.8

7.5

Commission Ratio %

5.5

4.4

3.5

4.2

Total Cost Ratio %

14.2

16.3

8.3

11.7

Solvency Ratio

1.8

2

2.2

2.2

Claims Settlement Ratio %

98.3

99.4

96.4

98

Conservation Ratio %

84.5

85.9

87.5

82

ROE %

81.7

17.6

15.2

11.7

 

Key Concerns 

 

  • Inability to retain and recruit individual agents on a timely basis and at reasonable cost.
  • Exposed to misconduct and fraud by employees and intermediaries.

 

  • Actual claims experienced and other parameters are different from the assumptions

 

  • Interest rate fluctuations.

 

  • Significant proportion of total new business premiums are generated by single premium
  • products.

 

  • Does not meet solvency ratio requirements.
 

Summary

 

      LIC is a market leader in the Indian life insurance industry with strong distribution network and diversified product suite.

On valuation front if we take FY21 earnings and upper price band (`949) the issue is priced at a P/E of 201.91x which makes it seem expensive, But considering the corporation's size and the premier position in its field with a market share of the business, it can be termed a full-priced offer.
The Embedded Value of LIC is around 1.1 whereas the industry listed Life Insurance Peers like  SBI Life, HDFC Life and ICICI Prudential is between 2.4 to 4.05 which makes LIC’s pricing lucrative.

Hence we recommend our clients to "SUBSCRIBE"

 

 DISCLAIMER 

 

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