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
https://t.me/joinchat/AAAAAELl4KUnaJzi-JJlDg/
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