LIC to be India’s fifth largest company after RIL, TCS, HDFC Bank, and Infosys

• The market capitalisation of LIC is estimated at ₹6 lakh crore, significantly less than ₹13 lakh crore pegged earlier.
• With this, post-listing LIC could become the fifth largest company on the exchanges.
• The life insurance behemoth is getting listed on May 17 in the Indian stock markets.

Life Insurance Corporation’s (LIC) initial public offering (IPO), which is all set to launch next week, may become the fifth largest company in terms of market capitalisation on exchanges.

The government is looking to raise ₹21,000 crore by selling 22.13 crore shares or 3.5% stake in the life insurance behemoth.

Earlier the valuation of the life insurer was estimated at around ₹13 lakh crore, which has now come down to ₹6 lakh crore. As per this estimate, LIC would become the fifth largest company in the Indian stock market.

The unexpected Russia-Ukraine conflict delayed the IPO and led the government to sell less stake in the company than earlier promised. This brings down the valuation of the company as well.

While LIC is still the biggest IPO in the history of the stock market, its issue size is close to that of Paytm, the second largest issue ever.

As per the original DRHP, the government would be selling around 5% stake in the company.

Analysts believe LIC is significantly lower valued than other listed private players despite being the dominant player. LIC’s price band is fixed at ₹902-₹949.

“While LIC valuations appear to be cheap as compared to listed private players investors need to keep in mind that LIC has a lower value of new business (VBN) margin of 9.9% in FY2021 as compared to private players who have VNB margins of 22-27% due to higher share of participation and group product. Despite lower margins and inferior business mix, we believe that the IPO is being priced reasonably and offers value to investors with a long-term view,” said Yash Gupta, equity research analyst at Angel One.

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