LIC owns 3.7% of India’s listed market cap; should you invest in LIC IPO?

Are you following the latest news on IPOs? LIC has finally filed its Draft Red Herring Prospectus (DRHP) with SEBI.

As the historic event of the LIC IPO is nearing, market interest in the issues has been increasing. LIC enjoys the leadership position in India’s sunrise sector and is likely to find a place amongst India’s most valued companies.

And as LIC of India is the 10^th most valued life insurance brand globally, its IPO is likely to make a compelling proposition.

And here are some big numbers

Largest asset manager in India with the total AUM (Asset Under Management) of Rs 39.55 lakh crore*

AUM of 3.3X as compared to the AUM of private insurers

~ 24% of policyholders’ investment portfolio in equity (on a standalone basis)

Over 90% of policyholders’ equity AUM in the top 200 companies (on a standalone basis)

95.9% of total debt AUM in Sovereign and AAA-rated securities*

* As on September 30, 2021

The most formidable figure pertaining to LIC, however, pertains to its immense and undeniably strategic role in the Indian equity market, even before its stock goes public. On February 14, 2022, the total market cap of 5,249 stocks listed on BSE was Rs 255.4 lakh crore; of this LIC owned 3.7% (Rs 9.4 lakh crore) through its stake in various companies.

It plays the role of a sheet anchor in the shareholding of many listed companies and works as a strong counterbalancing weight against FPI (Foreign Portfolio Investors) holdings. For instance, LIC held 16.23% stake in ITC as on December 31, 2021, while FPI investors held a 9.99% stake. This is crucial considering the promoter doesn’t hold any stake in the company.

Similarly, it wouldn’t be an exaggeration to say that LIC along with the mutual fund industry has helped ICICI Bank maintain its ‘Indian’ status. As on December 31, 2021, FPIs held a 45.28% stake while that of LIC and the mutual fund industry was 7.77% and 28.20% respectively.

And that’s not all.

In some listed and unlisted companies, such as UTI Asset Management Company (AMC), Axis Bank, Stock Holding Corporation of India, Clearing Corporation of India, National E-Governance Services Ltd., LIC is a promoter.

Further, a whole host of companies, such as ACC, Ambuja Cements, India Cements, Bharat Bijlee, CDSL, DCM Shriram, Grasim, Mahindra and Mahindra, L&T, National Stock Exchange, Tata Steel and Tata Power amongst others, have LIC nominated directors on their boards.

Public Sector Banks (PSBs) such as Bank of Maharashtra, SBI, UCO Bank, Central Bank of India and Indian Overseas Bank, to name a few, have appointed LIC officials as shareholder directors.

LIC Housing Finance, LIC Mutual Fund and IDBI Bank are classified as associate companies of LIC.

You see, Covid-19 was a stress test for Indian life insurance companies. Given their steady performance even during such a tricky phase, they are likely to be on a firm growth path going forward. And LIC being the market leader stands the best chance to capture the future growth opportunities.

Hurry up! Open a Demat account now and be ready to invest in LIC IPO.

You may also like to read: 5 things that make the LIC IPO an interesting proposition

Disclaimer:

The blog is for information purposes only and anything mentioned herein shouldn’t be construed as a fundamental reason to buy/hold/sell any stock. Furthermore, the information provided in the blog and observations made therefrom shouldn’t be treated as the extension of recommendations made on the other properties of Ventura Securities. If you follow any research recommendations made by our fundamental or technical experts, you should also read associated risk factors and disclaimers.

We strongly suggest you to consult your financial advisor before taking any decision pertaining to your finances. Asset allocation becomes extremely relevant.

We, Ventura Securities Ltd, (SEBI Registration Number INH000001634) its Analysts & Associates with regard to blog article hereby solemnly declare & disclose that:

We do not have any financial interest of any nature in the company. We do not individually or collectively hold 1% or more of the securities of the company. We do not have any other material conflict of interest in the company. We do not act as a market maker in securities of the company. We do not have any directorships or other material relationships with the company.

We do not have any personal interests in the securities of the company. We do not have any past significant relationships with the company such as Investment Banking or other advisory assignments or intermediary relationships. We are not responsible for the risk associated with the investment/disinvestment decision made on the basis of this blog article.