LIC public issue will be a good buy for investors, says Manish Sonthalia of Motilal Oswal AMC

Investors will have nothing to lose at the current valuation of the Life Insurance Corporation of India (LIC) public issue, which is expected to hit the market on Wednesday, Manish Sonthalia, associate director and fund manager at Motilal Oswal Asset Management Company, told CNBC-TV18 in an interview.

“It will be a case of massive subscribe at the current price and it would be good buy for investors,” Sonthalia said.

LIC is floating a Rs 21,000-crore public issue in the market, the largest in Indian history, at a trimmed-down valuation of 1.1 times its embedded value of Rs 5.5 lakh crore.

The public sector insurer’s IPO is a complete offer-for-sale where the government is offloading 3.5 percent stake at a price band of Rs 902-949 per share. Up to 10 percent of the issue has been set aside for policyholders of LIC, who will also enjoy a Rs 60 per share discount to the price band.

Earlier, the government had planned to raise close to Rs 60,000 crore from the IPO by selling a 5 percent stake at a valuation of more than two times the insurer’s embedded value. However, adverse market conditions since Russia’s invasion of Ukraine has forced the government to trim down both the size and the valuation of the issue.

Analysts have also largely recommended investors to subscribe to the public issue. “We believe that LIC’s distribution advantage, increasing sales mix of direct and corporate channels, and a gradual shift to high margin Non- participating products could be possible drivers for LIC’s future growth, negating lower than industry growth rates,” brokerage firm Investmentz.com said in a note.

On the overall market, Sonthalia advised investors to exercise more caution as he believes that expectations of upside from current market levels are a stretch. “This will be the year where protecting downside will be more improtant than looking at some great upside from current level,” Sonthalia said.

The veteran asset manager also argued that value stocks will triumph in a rising interest rate environment as growth-oriented stocks see a compression in their valuations as investors become more conservative in pricing profits far away in the future.Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.