Life Insurance Corporation of India (LIC) shares made a lacklustre debut on the stock exchanges on Tuesday, listing at discount to the IPO price. On BSE, LIC share opened at Rs 865 apiece, down 8.65 per cent from its issue price of Rs 949 on BSE. The share opened at Rs 872 on NSE, 8.8 per cent discount over the premium. Soon after listing, LIC scrip made a quick recovery to hit Rs 920 on BSE. However, later it lost the gains and traded below Rs 900 levels during the early hours. On listing, LIC had a market capitalisation of Rs 5.5 lakh crore, placing it among the top five listed companies in the country by market capitalisation. The central government offload 3.5 per cent of its stake in the insurance behemoth.
LIC initial public offering received a stellar response from the investors during the subscription period. The public issue was booked 2.95 times over the 16.20 crore shares that were on offer. LIC IPO received bids of over 47.83 crore shares against the total issue size of over 16.20 crore shares, according to the data available with the National Stock Exchange (NSE). However, the sentiment in the global and domestic market has dampened the euphoria around the listing of mega IPO.
LIC Investors : What Should be you Strategy on Listing Day?
“The subdued listing of LIC is in-line with expectations in context to the drop in market dynamics from the opening of the IPO to the listing date,” said said Vinod Nair, head of research at Geojit Financial Services.
“LIC IPO valuation is attractive considering its strong market presence, improvement in profitability due to the changes in surplus distribution norms and strong sector growth outlook. So, LIC can perform well provided we have a bounce in the market. We were expecting listing gains due to discounted valuations of LIC compared to private life insurance player,” he added. However, the broad sentiments of the market have changed which will impact the performance of LIC in the short to medium-term, he further mentioned.
“Investors could hold the shares post listing for long term gains rather than have knee-jerk reaction due to current market sentiments. If they can they could hold for long term as valuations are comparatively attractive for the company,” said Narendra Solanki, head fundamental research- investment services, Anand Rathi.
LIC Policyholders: What Should you Do?
“A risk averse and first-time/policyholder investor should have a cautious view on the performance of LIC. While risk takers can buy and hold on a short to medium-term basis, based on the market trend. We are more positive on private life insurance companies on a long-term basis due to the headwinds of LIC notably – declining market share, lower short-term persistency ratios and sub-par margins,” Nair further explained.
“LIC policyholders could continue to hold and as profitability improves the company could well be a good dividend play in future. Also the valuations are attrative hence there is adequate margin of safety as compared to peers,” Solanki added.
“LIC Policyholders can sell 25 per cent of allotment to book listing gains and keep 75 per cent for long term as believed at LIC IPO is at significant discount to other listed private life insurance companies line HDFC Life, ICICI Prudential Life Insurance and SBI Life,” said Yash Gupta, Equity Research Analyst, Angel One Ltd.
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