LIC shares tepid debut: Why investors should not look at listing gains alone

With a flat debut, Life Insurance Corporation of India eroded over 42,500 crore in investor wealth, as a weak listing resulted in its market capitalisation slipping to Rs 5.57 crore in early trade, according to a report in The Economic Times.

The LIC stock was listed at Rs 867 on the BSE, which is 8.64 percent discount to its IPO price of Rs 949.

LIC has finally been listed on the exchanges and is currently trading 5 percent below its issue price of Rs. 949 per share. However, Retail and LIC policyholders have received a discount of Rs. 45 and Rs. 60 respectively to the issue price and are marginally in the money.

Yash Gupta- Equity Research Analyst, Angel One Ltd. said, At current prices, LIC is trading at a P/EV (embedded value) of 1.08x which is at a significant discount to other listed private life insurance companies like HDFC Life, ICICI Pru Life, and SBI Life. As expected given the adverse market conditions listing has been muted for LIC. However, cheap valuations as compared to other listed players offer comfort, and investors with a longer time horizon can hold on to their positions while retail traders with a short-term view can exit their positions in case there is any upside movement over the next few days, he added.

Should investors only look at listing gains alone?

LIC is a long-term play in the Insurance sector and investors should not look at listing gains alone, said Girirajan Murugan, CEO, FundsIndia

"Any opportunity to add into LIC at a price lower than the IPO price should be used to invest more for the long term. There may be a bit of retail selling today due to the current sentiments in the overall market, but the long term fundamentals of LIC remain intact.

"Once the dust settles on the market due to the ongoing issues related to Ukraine- Russia war and the worries on the Inflation front, stocks in the Insurance sector along with other beaten down stocks in the Banking/ NBFC space should see good momentum," Murugan added.

B Gopkumar, MD & CEO, Axis Securities said, “While LIC debuted at a slight discount to its issue price, investors should not look to exit at current levels and hold the stock from a medium to long-term perspective. We believe LIC continues to be a solid bet in the long run as it is a play on the growth story of the under-penetrated life insurance industry. Its sustained market leadership position, robust pan-India distribution network, and shifting focus towards profitable products, thus supporting margins and improving persistency ratios, will collectively make LIC an attractive pick from a long-term perspective.

Published on: Tuesday, May 17, 2022, 11:56 AM IST