MUMBAI: Street cheered the more realistic pricing of the imminent LIC IPO at Rs 902-949 a share, which pegs the price to embedded value — present value of future profits — at 1.1 times, cheaper than peers like SBI Life , HDFC Life, ICICI Pru Life and MFSL.
This is expected to be attractive for investors, especially in the current market conditions marked by volatility due to rising interest rates across most developed and emerging markets amid skyrocketing inflation and the war in Europe . The Indian market at 17200.8 is down 7.5% from its record high last October with FIIs having sold around Rs 1.4 lakh crore of Indian shares in FY22.
The valuation of LIC at the upper band works out to Rs 6 lakh crore, while the embedded value is Rs 5.4 lakh crore. The government is offering to sell 22.13 crore shares or 3.5% of the outstanding shares, less than the earlier 31.62 crore shares or 5% of the equity at over Rs 2000 a piece, valuing the company then at Rs 13.5 -14 lakh crore and with a price to embedded value of 2.5 times .
“The valuation is sensible and more realistic than in the past , and I think it will be a decent draw for investors on that count,” said independent market analyst Ambareesh Baliga . At the proposed current valuation, LIC will list at a discount to peers like SBI Life which enjoys a price to embedded value of 2.1 times on a one year forward basis (FY24), HDFC Life (2.6x) and ICICI Pru Life (1.2x).
“No doubt the more reasonable valuation will be a draw , but over time investors would also be attracted to the counter by growth,” said Siddarth Bhamre , research head at Religare Broking. “Peers like SBI Life and HDFC Life are seeing market share rise while LIC has seen some erosion in share to around 63% from 66% over the past three years. Markets will look not just at value over time but growth.”
Offer for sale