Is It Worth Investing in LIC IPO for Gains?

The Government of India has priced the LIC Initial Public Offering (IPO) reasonably well, aiming to ensure its success. Being a large-scale IPO, it is highly likely that a substantial number of people will get allotments, leading to lower demand on the listing day. Historical trends of large IPOs suggest that the listing price of LIC may not be exceptionally high.

Optimistic Outlook for Listing Gains

Given that one can apply at a discount of around 60 rupees, this IPO presents a unique opportunity for potential investors. You can consider applying for 15-30 shares to secure a few listing gains.

Past Performance and Future Outlook

The government's decision to sell LIC, despite its significant contributions as a 'cash cow' for several decades, is rooted in the company's inability to adapt to changing times. In an era where even remote towns and villages have access to affordable internet and the ability to order goods and services via mobile phones, LIC continues to rely on traditional commission-based insurance agents. This reliance is indicative of the company's failure to innovate and modernize its operations.

Long-term trends suggest that the banking, financial services, and insurance sectors will increasingly be integrated into smartphones. Unfortunately, the management at LIC is suspicious about this theory and reluctant to embrace innovation. This inertia could push LIC towards the same fate as legacy companies like Air India, HMT, or BSNL.

Declining Market Share and Performance Concerns

LIC's market share has been declining, reaching as low as 66.74 percent in 2018-19. This decline has raised serious concerns among the company's new top management about the performance of the corporation. Notably, except in pension and group scheme PGS, the company has largely missed its targets in most performance parameters.

Conclusion

The IPO of LIC is a double-edged sword. On one hand, the strategic pricing and potential for listing gains make it an enticing investment opportunity. On the other hand, the current trajectory of the company and its inability to adapt to the changing market dynamics may not bode well for its future. Investors should carefully consider the risks and potential returns before making a decision.