If there’s one thing that even dilettante investors have learnt in this bull run is that a powerful brand story can be more market-moving than the business model itself. Zomato’s listing last month was a temporary setback to the “deep value school of investing”. Several other IPOs are lined up, but none could be more exciting than the granddaddy of Indian insurance: Life Insurance Corporation of India (LIC). Its narrative is pitch-perfect: a multigenerational brand that’s on par with any hotshot consumer brand in terms of recall value, market dominance, and potential growth. It’s for this reason—and basis some murmurs in New Delhi about the government’s conservatism—that we chose to analyse what an LIC IPO would look like. An equally popular brand, which for all practical purposes should have been positioned and valued like a tech/e-commerce company but kind of missed the bus is IRCTC—the Indian Railway Catering and Tourism Corporation. The government valued IRCTC at under $700 million. Amid criticism that the government had been too conservative, IRCTC listed at more than twice that valuation in 2019 and is now worth $5 billion.
Needless to say, the government shouldn’t repeat the IRCTC misstep as it plans to raise $13.4 billion from the LIC flotation. LIC’s asset under management (AUM) of over $466 billion is more than the size of India’s mutual fund industry. And unlike banking where private banks have gained dominance, LIC still sells three in every four life insurance policies in India. Yet, LIC’s valuation metrics might be at a discount to that of the listed private players due to its product mix and business model. The most critical element in an insurance company’s valuation is the embedded value (EV) which is likely to be made public this month. Until then, read what our two ace writers have to say about how much is LIC actually worth and why. In the next few months, we’d be tracking this story closely. Here’s our kick-off, a Monday start of August 2021
