NEW DELHI: Insurance behemonth Life Insurance Corporation of India saw a modest stock market debut on Tuesday when it listed at Rs 872, on the NSE, down 8.11% from its issue price of Rs 949 amid uncertain investor sentiment. Its shares debuted at 8.6 per cent discount at Rs 867 apiece on the BSE, a tad lower than the discounted value at which shares were offered to policyholders and retail investors.
What should investors do?
Analysts, however suggest investors, who got the allotment during its initial public offer, should hold the stock from a long-term perspective as LIC is the largest asset manager in India with AUM of Rs 40.1 lakh crore on a standalone basis as at December 31, 2021. Moreover, it has a dominant position in the underpenetrated life insurance market with improving the financialization of savings. Experts also said that the discounted listing is an opportunity to buy the stock at cheaper levels for those who didn’t get the allotment or didn’t apply to the IPO.
“The company’s weak listing can be attributed to high volatility in the markets and negative market sentiments. LIC enjoys many competitive advantages like strong brand value, extremely large scale of operations, a huge network of agents, and an envious distribution network, further, the company’s issue was priced at a Price to Embedded value of 1.1x, providing a valuation comfort, so we suggest investors to stay with the company for the long term despite the negative listing. Those who applied for listing gains can maintain a stop loss of Rs. 800. New investors can take advantage of the dips to accumulate this share for the long term. We would like to add that the company’s further downside will be limited due to low float post listing,” said Parth Nyati, Founder, Tradingo.
“The current market is not conducive for primary issues and LIC being the largest IPO has witnessed a negative listing, the current market volatility has weighed down on the insurance titan’s listing. However, the prospects for the insurance industry in India are good due to the under penetration of insurance and a long runway of growth; hence LIC will be the beneficiary in the long term. Those who applied for listing gains can maintain a stop loss of Rs. 800. New investors can take advantage of the dips to accumulate this share for the long term. Another point to note has that, LIC didn’t pay any dividends in the last financial year, so there are high chances that the company might declare a good dividend this year, thus making it a good dividend play,” said Santosh Meena, Head of Research, Swastika Investmart Ltd.
“LIC shares listed at discount of nearly 9% on Tuesday, and currently trading at Rs 901. In the bidding process policyholders and retail investors were given a discount of Rs 60 and Rs 45 per share, respectively. One who has invested for the long term can hold the position as the insurance business is long-term in nature. In the short term we may see some correction ahead of the market volatility. Those who missed can buy on dips for the long term only,” said Akhilesh Jat, analyst at CapitalVia Global Research.
The listing comes at a time when the stock markets are volatile amid inflation at an eight-year high and rising interest rates.
“Due to increased inflation statistics, FII {foreign institutional investment} outflows, currency weakness, geopolitical and rate hike-related worries, markets are experiencing extraordinary volatility which has caused sell-offs in equity markets all over the world,” said Aayush Agrawal, senior analyst at Swastika Investmart Ltd.
The IPO – India’s largest ever initial share sale, was open for subscription between May 4 and May 9. It was subscribed nearly 3 times, led by strong demand from the insurer’s policyholders and employees. About 70% of the insurance major’s anchor book was subscribed by domestic mutual funds.
We are recommending buying with a medium- to long-term perspective on an at-par listing, as valuation multiple of price-to-embedded value of 1.1 times on historic basis is attractive.” said Geetanjali Kedia, senior research analyst at SPTulsian.com.
Brokerage Macquarie has initiated coverage on the stock with a ‘neutral’ rating. The foreign brokerage has suggested a target for LIC at Rs 1,000, which hints at a modest 5.37 per cent upside over the issue price of Rs 949.
The brokerage said any investor, who is taking exposure to LIC, is indirectly taking exposure to equity markets and the inherent volatility that comes with it. It added that a 10 percent correction in the domestic equity market could lead to 7 percent fall in the embedded value of the state-run life insurer as against a 1-2 percent impact for private sector life insurers
Macquarie Securities’ analyst Suresh Ganapathy noted that LIC has consistently lost market share in the individual business owing to lack of product diversification and excessive focus on single-premium and group business.
The government had planned to list LIC in March this year but had to defer it as market conditions were not favourable in the wake of the Ukraine conflict.
The offering is seen as being important to India meeting its ambitious target for selling off state assets. The debut performance will also set the mood for forthcoming issues after retail investors were badly burnt by India’s recent large IPOs.
LIC offered a discount to employees and retail investors of 45 rupees per share, while policyholders were given a discount of 60 rupees per share. The shares were allotted to the successful shareholders on May 12 at the upper end of the Rs 902-to-Rs 949 price band.
The Indian IPO market, which saw dizzying growth in 2021, has had a significant slowdown this year. This shows the impact of geopolitical tensions, stock market volatility, a price correction in over-valued stocks from recent IPOs, plus concerns about rising commodity and energy prices, and slower economic growth, EY said in a report on Monday. However, if market conditions improve there could be a robust pipeline of IPOs this year as more than 20 companies have filed draft prospectuses in first quarter of this year, said Sandip Khetan, Partner and Financial Accounting Advisory Services Leader, EY India.
With inputs from Reuters
Watch LIC IPO debuts on stock market, LIC Share falls 6% on listing
What should investors do?
Analysts, however suggest investors, who got the allotment during its initial public offer, should hold the stock from a long-term perspective as LIC is the largest asset manager in India with AUM of Rs 40.1 lakh crore on a standalone basis as at December 31, 2021. Moreover, it has a dominant position in the underpenetrated life insurance market with improving the financialization of savings. Experts also said that the discounted listing is an opportunity to buy the stock at cheaper levels for those who didn’t get the allotment or didn’t apply to the IPO.
“The company’s weak listing can be attributed to high volatility in the markets and negative market sentiments. LIC enjoys many competitive advantages like strong brand value, extremely large scale of operations, a huge network of agents, and an envious distribution network, further, the company’s issue was priced at a Price to Embedded value of 1.1x, providing a valuation comfort, so we suggest investors to stay with the company for the long term despite the negative listing. Those who applied for listing gains can maintain a stop loss of Rs. 800. New investors can take advantage of the dips to accumulate this share for the long term. We would like to add that the company’s further downside will be limited due to low float post listing,” said Parth Nyati, Founder, Tradingo.
“The current market is not conducive for primary issues and LIC being the largest IPO has witnessed a negative listing, the current market volatility has weighed down on the insurance titan’s listing. However, the prospects for the insurance industry in India are good due to the under penetration of insurance and a long runway of growth; hence LIC will be the beneficiary in the long term. Those who applied for listing gains can maintain a stop loss of Rs. 800. New investors can take advantage of the dips to accumulate this share for the long term. Another point to note has that, LIC didn’t pay any dividends in the last financial year, so there are high chances that the company might declare a good dividend this year, thus making it a good dividend play,” said Santosh Meena, Head of Research, Swastika Investmart Ltd.
“LIC shares listed at discount of nearly 9% on Tuesday, and currently trading at Rs 901. In the bidding process policyholders and retail investors were given a discount of Rs 60 and Rs 45 per share, respectively. One who has invested for the long term can hold the position as the insurance business is long-term in nature. In the short term we may see some correction ahead of the market volatility. Those who missed can buy on dips for the long term only,” said Akhilesh Jat, analyst at CapitalVia Global Research.
The listing comes at a time when the stock markets are volatile amid inflation at an eight-year high and rising interest rates.
“Due to increased inflation statistics, FII {foreign institutional investment} outflows, currency weakness, geopolitical and rate hike-related worries, markets are experiencing extraordinary volatility which has caused sell-offs in equity markets all over the world,” said Aayush Agrawal, senior analyst at Swastika Investmart Ltd.
The IPO – India’s largest ever initial share sale, was open for subscription between May 4 and May 9. It was subscribed nearly 3 times, led by strong demand from the insurer’s policyholders and employees. About 70% of the insurance major’s anchor book was subscribed by domestic mutual funds.
We are recommending buying with a medium- to long-term perspective on an at-par listing, as valuation multiple of price-to-embedded value of 1.1 times on historic basis is attractive.” said Geetanjali Kedia, senior research analyst at SPTulsian.com.
Brokerage Macquarie has initiated coverage on the stock with a ‘neutral’ rating. The foreign brokerage has suggested a target for LIC at Rs 1,000, which hints at a modest 5.37 per cent upside over the issue price of Rs 949.
The brokerage said any investor, who is taking exposure to LIC, is indirectly taking exposure to equity markets and the inherent volatility that comes with it. It added that a 10 percent correction in the domestic equity market could lead to 7 percent fall in the embedded value of the state-run life insurer as against a 1-2 percent impact for private sector life insurers
Macquarie Securities’ analyst Suresh Ganapathy noted that LIC has consistently lost market share in the individual business owing to lack of product diversification and excessive focus on single-premium and group business.
The government had planned to list LIC in March this year but had to defer it as market conditions were not favourable in the wake of the Ukraine conflict.
The offering is seen as being important to India meeting its ambitious target for selling off state assets. The debut performance will also set the mood for forthcoming issues after retail investors were badly burnt by India’s recent large IPOs.
LIC offered a discount to employees and retail investors of 45 rupees per share, while policyholders were given a discount of 60 rupees per share. The shares were allotted to the successful shareholders on May 12 at the upper end of the Rs 902-to-Rs 949 price band.
The Indian IPO market, which saw dizzying growth in 2021, has had a significant slowdown this year. This shows the impact of geopolitical tensions, stock market volatility, a price correction in over-valued stocks from recent IPOs, plus concerns about rising commodity and energy prices, and slower economic growth, EY said in a report on Monday. However, if market conditions improve there could be a robust pipeline of IPOs this year as more than 20 companies have filed draft prospectuses in first quarter of this year, said Sandip Khetan, Partner and Financial Accounting Advisory Services Leader, EY India.
With inputs from Reuters
Watch LIC IPO debuts on stock market, LIC Share falls 6% on listing
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