Life Insurance Corporation (LIC) made a weak start in the stock market on Tuesday as the stock fell 7.8% to Rs 875.45 at the close of trading. LIC listed Rs 867.20, a successful initial public offering that brought the government Rs 20,557 crore followed by an 8.6% discount to the issue price of Rs 949.
The insurer’s share was a one-day high of Rs 920 on the BSE and a daily low of Rs 860.10 on the BSE.
Market uncertainty was the main reason for the decline, LIC said. LIC chairman MR Kumar said, “We did not expect a big list as markets were volatile. It’s (stock price) we have to move on. ” He further added that policyholders who were excluded from the allotment at the time of sale of initial shares will now pick up the shares.
As of the end of Tuesday, LIC is now the fifth largest company in terms of market capitalization of Rs 5.53 trillion, ahead of Hindustan Unilever and others. Its market capitalization lags behind Reliance Industries (Rs 17.12 trillion), TCS (Rs 12.6 trillion), HDFC Bank (Rs 7.2 trillion) and Infosys (Rs 6.3 trillion). In addition, the country’s largest insurer got a place in BSE’s A Group Securities on its first day, said BSE MD and CEO, Ashish Kumar Chauhan.
Experts believe that LIC will be a long-term bet in the growth story of the entire insurance industry and will create long-term value for investors. B Gopkumar, MD and CEO, Axis Securities, said, “LIC’s sustainable market leadership position, strong Pan-India distribution network, and focus on profitable products, thus supporting margins and improving the stability ratio, together make LIC an attractive one. Will pick. The long-term perspective. “
Dipin’s secretary Tuhin Kant Pandey said the successful list of insurers marked a moment in ‘self-reliant India’ as the issue was largely influenced by domestic investors. “It was one of the largest retail participation in an IPO,” Pandey said at the listing event. The public offering was still the third largest IPO in the world so far this year, he added.
However, analysts at brokerage firm Macquarie, before Tuesday’s listing, argued that a large portion of life insurer’s embedded value (EV) consists of marked-to-market profits and that any market downturn could significantly affect EV. Further, investors taking exposure to LIC stocks are indirectly taking exposure to the equity market and the underlying volatility that comes with it. “A 10% fall in the equity market could cost EV 7%, which is significant in our view,” McCurry said Tuesday.
LIC’s IPO, the largest ever in the country, was subscribed almost three times during the May 4-9 share sale. However, the bids of foreign investors were Rs 2,291 crore in the original book and Rs 555 crore in the anchor book. The government is not interested in launching a follow-on public offer for at least the next one year. On the 25% minimum public shareholding rule mentioned by the market regulator, there is no need to meet LIC’s public float rules as the government may, at its discretion, exempt any public sector company listed from any or all provisions of the securities agreement rules. Brokerage firm Macquarie.