Adani Ports and its recent rise. Here's why
If you have been following the rise of Adani Ports’ stock price in recent weeks, you are probably curious as to what is driving this growth.
05 Mar, 2021
7 min read
7009 Views
IPOs have attracted overt attention of retail and institutional investors alike in the recent Indian stock market scene.
Last year, when the pandemic had driven Sensex down by over 34 percentage points compared to its pre-lockdown levels, a strong recovery ensued and many new names went public. In India, some of the biggest issues have been made by DLF, Reliance Power, Cairn India, and ICICI Prudential Life Insurance. But no one has ever witnessed what is about to take place in the stock market in 2022 - and that is, Life Insurance Corporation of India going public as a part of the government’s systematic divestment from some of its holdings.
Some of the experts are calling this IPO the mother of all IPOs in the Indian stock markets, while others have referred to the highly anticipated event as a mega listing - no matter what you call it, special provisions are being made to facilitate a smooth listing process, with some new rules being introduced to inject fairness and to set the expectations right. Let's check out some of the highlights, and major points that you need to keep in mind as the market gears up for this event.
The Securities Exchange Board of India has made some changes in its listing rulebook to accommodate the sheer size and to accommodate a company with a market capitalization as gargantuan as LIC’s. The insurer has tweaked its IPO size to 3.5% from 5%, fetching about Rs. 21,000 crores. The government will be offering 221,374,920 equity shares as an offer for sale in the IPO."
According to market analysts, The IPO valuing the insurer at Rs 6 lakh crore. The state-possessed insurer has bared its bedded value (EV) for the first time at about Rs5.4 lakh crore. The bedded value is the sum of the current value of unborn gains and acclimated net asset value. It could be considered analogous to book value but acclimated for unborn vittles and cash overflows. As you can see, this IPO will trump all the other IPOs that have taken place until now, and will be the biggest offer this year - and for many years to come. In fact, some experts have even said that an IPO of this size will absorb a significant amount of liquidity from the economy.
LIC's public offering's sheer size means that the allocation for policyholders, workers,non-institutional, and retail investors orders will be much bigger than any other Indian earlier offer. Then let’s review the offer size by categories.
LIC has fixed a price band of ₹ 902 each at the lower end and ₹ 949 each at the upper end. The bottom price is 90.2 times the face value of the equity shares, on the other hand, the cap price is 94.9 times the face value of the equity shares. LIC offers a deduction of ₹ 60 all to eligible policyholders bidding in the reserved order. While a reduction of ₹ 45 each is offered to retail individual investors. Bids can be closed for a minimum of 15 equity shares and in multiples of 15 equity shares thereof. The IPO is awaited to be open from 4 May to 9 May."
Now comes the last and the biggest question at hand - should you subscribe? It's not very easy to suggest" because market conditions are always changing and evolving over time, there are some observations that can be made. In the recent past, two general insurance corporations have gone public - namely, GIC Re and NIA Co. Ltd. Both of these offers have been disappointing to subscribers. NIA shares were introduced in the price range of Rs. 770-800, but is currently trading at Rs. 159 (at the time of writing.) On the other hand, GIC Re’s shares were introduced at Rs. 912, but are currently trading at Rs 197(at the time of writing.) But having issued bonus shares for shareholders that continued to hold within a specific time frame after the issue, the losses don’t look as steep as these numbers might suggest - or is it so? Even if you had subscribed to the NIA IPO, you have purchased each share at Rs 770, while currently holding Rs. 318 worth of shares for the same as a result of issuance of bonus shares. That’s still a steep loss of 58%+. GIC’s subscribers, on the other hand, stand at a 56% loss.
However, most are expecting something different from LIC, simply due to the sheer size and market capitalization of LIC in india. In fact, some have pointed out that even a marginal increase in the productivity of LIC’s workforce will result in notable growth and revenue boosts for the company. LIC currently employs 22 lakh agents - and if each agent were to sell one additional policy every year, then the company could see a massive boost in sales volume. We suggest that you take a more technical approach to deciding whether to subscribe or not. Looking for more knowledge on such super-avenues of investment? Then log on to our website www.angelone.in, and keep the learning going!
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