Know About Some Side Trading Opportunities Amidst LIC’s IPO

Though the pricing of LIC’s IPO (initial public offering) is yet to be decided, the market expects its size to be between Rs. 53,500 crores and Rs. 93,625 crores. The span between the two ends (about Rs. 40,000 crores) is nearly 1/3^rd of the amount raised in 2021 ─ that was the primary market’s best year.

Want to know more about this IPO and other trading options? Keep scrolling!

Is There Any Underlying Fear Over the LIC IPO?

With this giant issue striking the market, there arises a concern related to liquidity being pumped out from the secondary market while applying for this IPO. Such fears are groundless for several reasons.

Firstly, the liquidity-based apprehensions are primarily applicable to the retail sector as it may loosen its position by investing in the public offering. Such unrolling usually takes place during market highs. The Indian stock market has been dropping since mid-January, and the retail businesses may be incurring losses. They wouldn’t want to book losses just for the sake of investing in LIC.

Secondly, the nation’s market has grown in depth and width since the COVID-19 pandemic. The system offers enough liquidity to see through this IPO. Furthermore, since a part of the offering has been obstructed for policyholders, low or high liquidity is not a matter of concern.

Get an Insight into Other Trading Chances!

Sail through these four trading opportunities:

CDSL

As LIC is locking about 10% of its issue for policyholders, many first-time investors may open their Demat accounts. LIC has 1.15 million agents and 290 million live policyholders. CDSL, as per its portal, has about 58.50 million investor accounts. Demat accounts are mandatory for all initial public offering applications.

CDSL is a listed depository operating in India. Even if it gets a part of those new investor accounts, it would be huge against its present base.

Brokers

When opting for an IPO, an individual may not necessarily require a broking account. However, during allotment, investors will require one if they wish to sell shares. Several first-time users can join the market via this IPO and open trading accounts under various brokers.

Since most brokers provide free-of-cost trading accounts, they may not be instantly gaining from these new accounts ─ the big benefit is the client acquisition’s lost cost. These brokers may resort to cross-selling of other products to these new applicants.

Insurance Companies

Expectations are that LIC’s listing price and offer price may re-rate the industry. The Indian market desires growth or speed rate oversize. Hence, even if the Life Insurance Corporation of India is a leader, certain entities are improving at a rapid pace and can be re-rated.

Index Adjustment

Based on the issue price of LIC, its non-promoter holding can be valued in the range of Rs. 53,500 crores – Rs. 93,625 crores. An index construction offers weightage in accordance with the free-float market capitalization (i.e. the non-promoter holding). LIC’s listing will cause the index’s re-adjustment in the near future.

LIC would be among the best three entities with respect to overall market capitalization, given an expected valuation of Rs. 10 –15 lakh crores. Once LIC gets included in the index, weights will be re-aligned, and a firm with the least weightage will be eliminated. This re-adjustment (whenever it happens) would facilitate a great trading opportunity.

Bottom Line

The primary issue with LIC IPO is the possibility for price appreciation after listing. Although the government will price this issue reasonably, its price trend across the secondary market would be of great concern. While this IPO can be the greatest in India, there are some other trading options to play this sort-after listing.

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Frequently Asked Questions

1. What will be the launching date of the LIC IPO?

LIC IPO is expected to be launched by 31 March 2022. SEBI will clear its offer shortly.

2. What is LIC’s EV?

As per the company’s DRHP, the embedded value (EV) of LIC amounts to Rs. 5.39 trillions. Firms usually trade at nearly three-four times the embedded value.

3. What is the face value of LIC IPO?

LIC will sell a maximum of 31.62 crores shares. According to DRHP, the face value of each equity share is Rs. 10.

Disclaimer: This blog is exclusively for educational purposes and does not provide any advice/tips on investment or recommend buying and selling any stock.