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Should you subscribe LIC in IPO issue?

Yes many of you have been asking me this question over the past few days so let's look at what this IPO has to offer.

LIC IPO for listing gains or core portfolio ?

This is the first thing you must be clear about. If you want to just get in and out for listing gains then you could make some money however if you are planing for core portfolio then in spite of the fact that IPO is at a discounted valuations to HDFC life, Icici Prudential or even SBI life I would still avoid this from a core portfolio perspective.

Why do I say avoid despite being at a attractive valuation to peers?

First and foremost LIC has been loosing market share rapidly to its private sector counterparts and that never is a good sign. So in short this is the PSU bank of the insurance world. Anyways this is not the only issue lower profit margins than competitors and still contracting so this is not a good place to be.

The biggest issue is due to such Govt ownership this company has always been the bailout king. So though this is good from a govt standpoint it is not from a shareholders standpoint. This is even mentioned in the prospectus

"Certain actions with no guarantee that such will be beneficial"

Better options available in General insurance play which will grow faster

If you still would like to invest in this sector consider buying some of the top general insurance plays in the country. They will have steady and faster growth rates for atleast the next few years.

Should you Invest?

I am personally skipping this one as there are much better options available as of now in the market. I would rather invest in them rather the LIC IPO.

As usual if you are only trading/investing on the basis of this post please use your own risk management and then only trade/invest. Please do not over trade and always keep your risk in check.

Good trading and investing to you.


Glen Drago

Sub-Broker IIFL,Smallcase

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