Anand Rathi IPO report on Life Insurance Corporation of India
LIC has been providing life insurance in India for more than 65 years and is the largest life insurer in India, with a 61.6% market share in terms of premiums (or GWP), a 61.4% market share in terms of New Business Premium (or NBP), a 71.8% market share in terms of number of individual policies issued, a 88.8% market share in terms of number of group policies issued for the nine months ended December 31, 2021, as well as by the number of individual agents, which comprised 55% of all individual agents in India as at December 31, 2021. The Corporation was formed by merging and nationalizing 245 private life insurance companies in India on September 1, 1956, with an initial capital of ₹50.00 million. From their incorporation until 2000, they were the only life insurer in India. They were identified by IRDAI as a Domestic Systemically Important Insurer (“D-SII”) on the basis of size, market importance and domestic and global interconnectedness in September 2020.
Valuation and Outlook
At the upper price levels, the LIC has valued the IPO at 1.11 times its embedded value with a market cap of Rs.6,002 billion which we believe is quite lower when we compared with the three listed peer like HDFC Life Insurance Co, SBI Life Insurance Co. and ICICI Prudential Life Insurance Co. where the average embedded value stood at Rs 3,105 billion and the average market capitalisation-to-embedded value ratio arrived at 3.4 times. Hence, the issue looks quite attractive for investors. Considering the largest size of the IPO Company’s well diversified product portfolio, and financial track records and bright prospects ahead, we recommend a "Subscribe" rating to this IPO.