LIC: Buries death. A bit too late!

At last, the new LIC corporate commercial chucks widowhood, and instead tries to remind folks about their responsibilities to their families

After a gap of many years, the LIC chaps have figured that selling death may not be such a great idea in the New India. Until now, the life insurance behemoth has been featuring a widow to make its point about the importance of insuring life, as part of its umbrella corporate campaign.

While the widow herself was shown to have had her future secured by her late LIC-invested hubby, the thought of death during family dinners may not be palatable any more. Or so seems to think LIC. And the shiny, happy route the private insurance companies prefer in their advertising must have prompted LIC to smell the coffee. And make a transition from death to life.

Keeping with that strategy, the new LIC corporate commercial chucks widowhood, and instead tries to remind folks about their responsibilities to their families. The ad is clearly targeted at individuals who don't believe in insuring their lives. The film is set in a 'Kumbh Mela' sort of an environment. In all the shor gul and teeming crowds, a dad loses sight of his playful young daughter. And then begins the tension of the parent. The subliminal thought: The imminent tragedy of suddenly losing a loved one forever. And therefore the need for life insurance.

Of course, since this is no Manmohan Desai film (in which case the dad would have found his lovely beti inside a Kamathipura dwelling after 30 years), he finds the missing daughter within 30 seconds. So no tragedies, please!

Yes, the film does strike a chord. It's got the emotional ingredients, it's set in the desi milieu, and the execution and the performances by the protagonists are warm too. And it's good to see LIC isn't spoiling our dinner get-together by featuring sobbing widows. However, beyond that, there's nothing refreshingly new being told to potential consumers about the need for life insurance. The problem is, the private insurance players have exhausted all possible emotions in this category. Worry, tears, humour, happiness, joie-de-vivre, etc… so there's no idea handle left to pull on. Except to try and create some sort of an appeal through different executions.

In short, like all public sector sleeping giants, LIC has woken up too late. And from here on, it will have to rely on situational freshness to hawk its policies. The sad widow may have been junked, but as far as the ad concepts go, sadly, LIC has been left widowed. And no policy will help it come out of this communications tragedy!


Thursday’s Market Preview: Cautious opening likely

The domestic market is likely to open on a cautious note today on tepid global cues. The expiry of the September futures and options (F&O) contract will induce some volatility. This apart, the government is set to announce the weekly food and fuel inflation numbers today. Across the globe, Wall Street closed lower on Wednesday on lack of any economic triggers and on concerns about the ongoing debt crisis in some European nations. The Asian pack was mixed in early trade no the back of the Eurozone imbroglio. The SGX Nifty was up 9.50 points at 6,606.50 from the previous close of 5,997.

The local indices ended below their psychological levels with sharp cuts yesterday on profit booking by institutional investors. The decline was led by Sterlite Industries, which lost over 8% after the Madras High Court ordered the closure of its Tuticorin plant on environmental issues. Sideways movement in the negative terrain with a high degree of choppiness was seen despite the European markets opening higher. There was a gradual and volatile southward movement with the key indices finally settling near the day's lows.

The Sensex closed below the 20,000 mark at 19,956, down 148.52 points (0.74%). The Nifty breached its crucial 6,000 level to close 38.20 points (0.63%) lower at 5,991.

The US market closed lower on Wednesday in the absence of any economic cues and on worries about the ongoing debt crisis in some Eurozone nations. Spain’s top credit rating at Moody’s Investors Service is at risk as the nation struggles to emerge from recession and reduce its budget deficit, Ireland is set to announce the cost of bailing out state-owned lender Anglo Irish Bank on Friday. Financial stocks were also weak as the government is getting ready to exit its investments in Citigroup and American International Group, made during the height of the financial crisis.

The Dow slid 22.86 points (0.21%) to 10,835. The S&P 500 fell 2.97 points (0.26%) to 1,144. The Nasdaq fell 3.03 points (0.13%) 2,376.

Markets in Asia were mixed in early trade on Thursday on the back of the lingering Eurozone crisis. China’s stocks rose as financial and energy companies rallied on improving prospects for the economy.

The Shanghai Composite was up 0.71%, KLSE Composite was up 0.03% and Taiwan Weighted gained 0.13% while the Hang Seng was down 0.76%, Nikkei 225 was down 0.73%, Straits Times was down 0.27% and Seoul Composite was down 0.22% in early trade this morning. The SGX Nifty was up 9.50 points at 6,606.50 from the previous close of 5,997.

Holding its ground on a proposed law to make miners share profit with locals, mines minister B K Handique on Wednesday said the aim was to benefit tribals and not corporate giants like Tatas or Jindals, and also ruled out diluting the rules in favour of PSUs.

In saying so, Mr Handique rejected his steel ministry counterpart Virbadhra Singh's suggestion that PSUs should be exempt from the law that would mandate miners to sharing 26% of profit with locals who lose land to mining projects.


Commercial Engineers and Body Builders IPO: Expensively priced

The company is a relatively new entrant in the railway wagon refurbishment business and could face intense competition from more well-established players. Dependence on Tata Motors presents a client concentration risk for its commercial vehicle business

Issue Details

Number of shares: 12.24 crore shares
Issue duration: 30th September-5th October
Issue Price: Rs125 - Rs127 per share
Face value: Rs10 per share
Minimum order quantity: 55 shares
Listing: BSE, NSE
Lead book running managers: ICICI Securities Ltd and Edelweiss Capital Ltd  


Its EPS for FY10 stood at Rs4.48 per share. The PE works out to 27.90 at the lower end and 28.34 at the higher end of the price band. The pricing looks steep.

Business model

Commercial Engineers and Body Builders Co Ltd (CEBBCO) is entering the capital market to raise Rs153 crore through a 100% book building issue. Private equity players New York Life Investment Management India Fund (FVCI) II LLC
(1,285,101 shares) and Commercial and Automobiles Pvt Ltd (243,486) will offload a total of 15,28,587 shares. 

The company produces vehicle and locomotive bodies for diverse applications for road and railways transportation. It also conducts refurbishment of railway wagons and manufactures components for railway wagons, coaches and locomotives.

The company has bagged orders for manufacturing different vehicle bodies from original equipment manufacturers (OEMs) such as VE Commercial Vehicles Ltd (a joint venture between the Volvo group of companies and Eicher Motors Ltd), Ashok Leyland Ltd, Asia MotorWorks Limited, Man Force Trucks Private Ltd and Hino Motors Sales India Private Ltd (belonging to the Toyota group of companies), all of which also manufacture fully-built vehicles. For FY2010 and FY2009, its net sales from the commercial vehicles division were Rs121.16 crore and Rs109.36 crore respectively. As of 15 July 2010, its order book in the commercial vehicles division was Rs525.53 crore and in the railways division was Rs98.15 crore. The company is promoted by Kailash Gupta and Ajay Gupta.

Financial snapshot

Its cash flows were in the red in FY10 and FY09 at Rs0.30 crore and Rs17.39 crore, respectively. 

Objects of the issue

The company plans to incur capital expenditure for the railway project at Gram Imlai in Jabalpur district at a cost of Rs80.30 crore. The combined wagon and EMU coach manufacturing facility will have a production capacity of approximately 1,200 wagons and 150 EMU coaches per annum. The total cost of the railway project is Rs130.30 crore which would be implemented in 2 phases. Phase-I of this project involves setting up the wagon manufacturing facility, while Phase-II of the project is for the EMU coach manufacturing facility. The funding will be through a mix of net proceeds, internal accruals and debt. It will prepay loans of Rs59.05 crore.

Analyst's take

Rating agency CRISIL has assigned an 'IPO Grade 2' to the issue indicating 'Below Average Fundamentals'. The report notes that CEBBCO is a relatively new entrant in this segment and could face stiff competition from existing incumbents in the refurbishment and wagon businesses. Post the commissioning of its wagon capacity, it would account for just around 4% of the total wagon capacity as of 2008-09. Its ability to bag orders remains contingent on how well the company is able to establish strong contacts within the Indian Railways. Organised players in the fabrications business as well as existing wagon manufacturers could easily cater to the Indian Railways' demand for both refurbishment and new wagons as the business is neither very capital intensive nor requires a long gestation period and orders are tender driven.


  •  Strong track record with reputed customers in the commercial vehicles industry
  •  Wide range of product applications and offerings
  •  Ability to continuously expand product offerings
  •  State-of-the-art technology and certifications for design, production standards and quality assurance
  •  Strategic geographic location
  • Competitive cost structure
  • Ability to compete effectively with the unorganised body builders


  •  Limited customer concentration

In FY 2006, 2007, 2008, 2009 and 2010, it derived 56.32% (Rs28.24 crore), 86.36% (amounting to Rs82.59 crore), 73.91% (Rs88.11 crore), 69.23% (Rs77.57 crore) and 52.46% (Rs95.93 crore) respectively, of its net sales from Tata Motors Ltd.

In FY 2009 and FY 2010, it derived 2.39% (Rs2.67 crore) and 27.49% (Rs50.27 crore), respectively, of its net sales from the Indian Railways.

  •  Cyclical business

The commercial vehicles industry is cyclical in nature. A substantial part of its sales are realised during the second half of the financial year due to low demand in monsoons from mining and road-construction sectors.

  •  Competition

It faces competition in the commercial vehicles division from the unorganised sector.

Concluding notes

The IPO is expensively priced.



k a prasanna

7 years ago

The EPS for FY 10 on the post issue capital of Rs 55cr comes to Rs 3.45. At Rs 125 -127, the company is demanding a valuation of 37 PE, which is very expensive. The company’s net profit margins are inconsistent. CRISIL IPO grade 2/5, indicating below average fundamentals. The company had negative cash flow for FY 10.


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