Is LIC’s Highly Anticipated IPO of 2021 Just A Hype?

LIC-IPO

Racking up over ₹ 30,000 Crore in investments even as the pandemic plagues business across the world, Indian companies particularly some niche industry defining startups have seen a profitable 2020. Carrying forward the strength of a strong financial year nearly two dozen companies are lined up to go public in 2021.

Domestic market according to experts are currently witnessing a strong bullish trend, this in turn has resulted in FOMO among investors across the board as normal average listing gains hover well above a healthy 15%.

This is attracting all the investors towards the Ipo. in 2021, the scenario is likely to continue in the first quarter at least.

Says Vishal Wagh, Head of Research at Bonanza Portfolio Ltd. This claim is ultimately substantiated by a series of market listings like Sequoia Capital backed Indigo Paints which received SEBI’s approval to raise ₹ 1000 Crore through IPO amongst a host of companies.

LIC’s IPO: A Brief Analysis

Spearheading the IPO bandwagon is the highly anticipated IPO of LIC. Although the insurer has not specified a date to go public, Government of India has expressed its desire to list the IPO on domestic exchanges in the January-March quarter of FY2021. This forms a part of the government’s budgeted disinvestment target of ₹ 2.10 Lakh Crore for the current financial year.

LIC is among the 24 life insurers currently operating in the Indian marketplace and commands a whopping 69% market share at least for the previous financial year. FY 2020 also saw LIC’s first-year premium collection grow by 25.17% amounting to a staggering ₹ 1.78 Trillion according to IRDAI reports.

Timing The Market

One of the most interesting aspects of this IPO is the timing. Firstly, Government of India holds a 95% stake in LIC and has assets worth ₹ 34 Trillion. The move by Government to disinvest in this magnitude is just the start of the chains of disinvesetments to follow to the likes of Air India, BPCL, and Concor whose disinvestmensts are long overdue.

Secondly, the banking sector in India has seen sustained losses for some time now. What begun as issues related to asset quality and poor liquidity management has only been exaggerated by the pandemic and RBI’s slumbering interest rates. Thus, one can infer that LIC’s IPO can help the BFSI sector regain its footing in the indices by attracting a significant chunk of retail and institutional investors.

A Bullish 2020? Well, Sort of…

Now, the astute investors will have no problem classifying 2020 at least its second half as one riddled with periodic rallies which are continuing to this day and if the financial market’s health so far is any indicator of what’s about to come, we can be confident in its succes for this fiscal year as well. Abhay Joshi, founder – UnlistedArena  had this to say-

We may see further activity in the grey market as and when ipos get confirmed

This can be an indicator of strong trend with less activity, it is expected however that LIC’s listing will have record breaking outcomes. A quick look at the global trend of startups opting for an IPO exit for FY2021 will soon come over to India as well with the likes of Zomato, Grofers, Nykaa, Droom, Delhivery, among others having indicated a desire to go public soon.

What Does This Mean For The Economy?

In, my opinion this trend signals a healthy public participation in the changing dynamics of India’s economical scenario. A blooming middle class and high rates of urbanisation comes with it’s problems and blessings all of which could have a blog for itself. However, as far as the financial market is concerned we are witnessing a new era of investing which is not dominated by institutional market players but influenced by the public. This not only gives industries a better pool to expand with but to have a higher sense of accountability as well. And if you don’t want to miss out on this trend, check out this easy to understand guide on how to get started in the stock market.