Benefit from LIC IPO through this smart strategy


Last updated on August 24, 2022

When it opens next month, LIC IPO is going to be India’s biggest public offering and thus, it wouldn’t be an exaggeration to say that this upcoming IPO is going to shape the future of Indian stock markets. Post listing, LIC is expected to be India’s largest company by market capitalization. Given the huge size of the offer, there are multiple ways to benefit from LIC IPO.

One obvious way to benefit is to participate in LIC IPO and we will surely keep updating you about the latest news and developments regarding the offer. However, there are other clever ways as well to benefit from LIC IPO. Since we don’t yet know the pricing of the offer, it makes sense to find out some proxies. Here are 3 such stocks which are likely to benefit immensely from LIC IPO.

#1 CDSL stands to benefit from LIC IPO

CDSL has been a multibagger for several investors ever since its listing in 2017 (just as we highlighted in our review of CDSL IPO). Now the stock is undergoing correction but it’s still trading around major support levels of 50 day moving average. To its credit, the stock has high ROCE (32.4%) and the company has debt-free balance sheet. Since thousands of demat accounts are being opened by investors purely to participate in LIC IPO, CDSL is expected to be a major beneficiary of this trend.

The company is one of the only two depositories in India and CDSL is ahead of its competitor in almost every way. In the eight months of the current financial year, the two depositories added 2.2 crore new accounts with CDSL contributing a disproportional majority of the fresh accounts at 1.92 crore demat accounts. This highlights the market dominance of CDSL and this trend is likely to continue in future as well.

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#2 Angel One – Brokerages stand to benefit

Brokerage houses are also going to benefit immensely from the listing of India’s largest insurance company. Incidentally, LIC plays an important role in stabilizing stock markets. Since its listing in September 2020, Angel One has delivered consistent gains in market share and stock price. In the last year, the stock’s returns are around 280%. In the last month or so, the stock has been range bound but continues to trade at key support levels of 50 day moving average.

Despite the massive increase in price, the stock trades at an attractive PE ratio of 20.6. This low PE ratio is supported by regular and consistent increase in profits. In the latest quarter ended December 2021, the company reported 125% increase in its net profit. As such, it is no wonder that Motilal Oswal has a price target of INR1,900 on the stock implying an upside of 46% from current levels.

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#3 ICICI Securities – Down but not out

ICICI Securities is yet another player which stands to get meaningful tailwinds from the listing of LIC. In a not-so-distant past, ICICI Securities used to be India’s leading brokerage house. And even though it is no longer the numero uno now, its ICICIdirect platform continues to be a major player in retail segment.

The company gets 63% of its revenues from brokerage services so it is a prime contender to benefit from increased trading activity by investors following the listing of insurance major. The stock currently trades at a P/E ratio of only 16.9 and also features a high ROCE of 37%. It has gained 74% over the last one year but has recently gone into consolidation phase, effectively providing a good entry point to investors.

A simple strategy of creating an equal-weight portfolio of these three stocks can act as a meaningful proxy to LIC IPO.


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