As Life Insurance Corporation (LIC) gears up for its Rs 65,000-crore initial public offering (IPO), analysts are assessing how the Street will respond to the state-run life insurance behemoth.

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According to UBS, the market could be assigning a valuation discount to LIC compared to its listed peers, owing to its traditionally savings-heavy business mix, lower operating leverage, heavier dependence on the agency channel and state-owned enterprise (SOE) status.

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In the brokerage's view, the market seems to be pricing in increased competition from LIC ahead of its potential -listing. HDFC Life, SBI Life, Max Financial and ICICI Prudential Life currently trade at price-to-enterprise value (P/EV) ratios of 2-3.3 times FY23E.

UBS has a 'neutral' rating on HDFC Life, and a 'buy' call each on ICICI Prudential Life, Max Financial and SBI Life. Here's how it views LIC's listed peers:

Source: UBS

LIC depends heavily on the agency channel, unlike private insurers, though the productivity of the state-run company's agents is significantly higher, UBS pointed out.

Here are some highlights of what UBS said:

LIC to be third largest stock in India by market cap

LIC IPO size equivalent to 25% of total capital raise in 2021

LIC largest institutional investors in the Indian market with $520 billion in total AUM

LIC is an important entity for government

LIC owns over 19 percent of all government bonds, bigger than RBI

LIC IPO FAQs | Which policyholders can apply for shares?

UBS said risks to its long-term estimates include an economic slowdown, a weakening currency, global economic events and government policy changes.

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(Edited by : Akanksha Upadhyay)

First Published:Feb 16, 2022 12:33 PM IST