DON'T RETIRE RICH

Thursday, 5 May 2022

My views on LIC IPO

 

 

 

India's biggest IPO by the Life Insurance Corporation of India (LIC) has hit the market.

It’s on till 9th May 2022.

The size is the biggest with Rs.20,557 crores targeted.

 

 

LIC, at the end of the day, is owned by Govt.

We all know what Govts can do when it wants to win Elections.

For example, LIC had put its money in IDBI BANK for a bailout, in spite of this move being against the interest of small shareholders

So, LIC will continue to be squeezed by Govts

 

Then, it's also a fact that Private sector companies like HDFC, TATA, and MAX are gradually eating away LIC's share and this will only grow more in the coming years.

With better services and better management, I would prefer to hold shares of HDFC LIFE / ICICI LIFE over LIC

LIC is a slow lethargic giant

 

Just see this...

LIC is 20 times bigger than the next biggest Insurance company, that is...SBI life

But LIC profit is only marginally higher than SBI Life

 

If you remember 20-25 years back, when HDFC BANK came to equity markets, these so-called experts were telling us that no one can beat SBI





LIC HAS HUGE LAND PARCEL:

Many point to the huge real estate that LIC has.

But MTNL, BSNL, and Air India too have huge real estate but did this real estate help in generating returns to Share Holders? The answer is a clear NO!

And some point to the huge Agent Force that LIC has.

Remember UTI in Mutual Fund space?

Experts said that private mutual funds will find it difficult to replace the huge size of UTI agents. Where is UTI now?

 

HUGE EQUITY HOLDINGS:

Yes... LIC has huge equity holdings.

But this equity holding is from the money of policyholders and thus this profit, as and when generated, will go to policyholders and not to you as a shareholder.

(Similar to AMC... for example, if NIPPON AMC has huge equity holdings, the money(Holdings) belong to mf investors and not shareholders)

 

Remember, Markets reward only EFFICIENT companies

and for me, LIC is not as efficient to warrant an investment.

From 2016 to 2021, LIC premium increased at a CAGR of 9% only when the industry CAGR increased by double at 18%

 

 

Finally, the experience with HUGE IPOs in India hasn’t been good

All such MEGA IPOs have only resulted in heartburn for those applied in the IPO.

 

I would, thus, sit out and will NOT be applying for LIC IPO.

 

BTW,

for a LIC Policyholder, there is a discount of Rs.60 which could result in Listing Pop-up

 

Looking for listing gain: maybe yes...can go

 

Looking for Wealth Creation: Better options are definitely available.

 

 

Long term, I would rather look at other companies or go for a Diversified portfolio in form of a Flexi-cap Mutual fund.

 

 

Disclaimer: Purely my personal views.

You are requested to talk with your financial guide before considering an investment. This is shared only for information purposes

 

Regards,

Srikanth Matrubai

QPFP,

Author - Don't Retire Rich

 

 

 





All the best,
Regards,
Srikanth Matrubai
MUTUAL FUND DISTRIBUTOR
REBALANCE VOLATILITY CERTIFIED COACH
Srikanth Matrubai, Author of the Amazon Best Seller DON'T RETIRE RICH


You are strongly encouraged to consult your financial planner before making any decision regarding this investment. The views expressed here are the author's personal views and should not be interpreted as a recommendation to invest/avoid.

 
Srikanth Matrubai Author of the Amazon Best Seller DON'T RETIRE RICH

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