Trading Guide: Explained why retail investors are waiting for LIC IPO eagerly!

Peter Lynch in his book ‘Beating the Street’ writes about how a class of seventh graders picked up stocks for a paper portfolio that gave a return of 69.6 percent beating most fund managers and the S&P 500 which gained 26.08 percent.

The stock selection process of the kids was simple- they picked up stocks of companies they knew like a toy manufacturer or baseball swap card makers, known cloth brands, cold drinks and so on.

Basically, they bought companies that they saw around them in their everyday life.

We spoke to Vikas Singhania, CEO, TradeSmart to decode what is driving retail interest towards LIC IPO:

Indian retail investors now have a similar opportunity–of investing in a company that they have heard since their childhood.

Life Insurance Corporation or LIC is a household name in India. In fact, LIC is the second most popular and trusted brand after Tata. It is not without reason that retail investors are excited about this company’s IPO.

The government expects that LIC’s IPO will bring in 7.5 million new investors to the market through this issue.

Market experts have been quoted as saying the number could be much bigger as LIC has nearly 29 crore policyholders, who will get a chance to apply for the issue at a discount.

LIC has kept 10 percent of its offering blocked for policyholders and 5 percent for employees.

LIC is a behemoth with assets of Rs 39.7 trillion, which is bigger than the GDP of many countries. The company commands a market share of 61 percent of new premium collection and 72.5 percent of all policies sold in India, in other words around 3 out of every four policy is written by LIC.

The asset under the management of LIC is 1.1 times the asset of all other mutual funds in India.

The insurance company’s assets are equivalent to 19 percent of India’s GDP and its equity investments are 4 percent of the total market capitalisation of all stocks listed on the NSE.

Data of March 31, 2021, shows that there are around 1.35 million individual LIC agents and 114,000 employees in LIC.

The company has nearly 2,000 branches and has investments in over 370 companies with a majority stake in 35 of them. Globally, it's the 10th most-valued insurance company in terms of assets and has an embedded value of $72 billion.

Given these data, a retail investor is justified in getting excited about the issue. Having said that, LIC does not compare favourably on most operating parameters with its peers in the private sector.

However, for a retail investor owning shares of LIC will be a proxy for owning the insurance sector and mutual fund sector in the country.

(Disclaimer: The views/suggestions/advices expressed here in this article is solely by investment experts. Zee Business suggests its readers to consult with their investment advisers before making any financial decision.)