Teji Mandi Explains: LIC halves investors’ capital

The fall in insurance behemoth Life Insurance Company (LIC) share price is a temporary blip, says the government. Is it so? Let’s read into it

Teji MandiUpdated: Tuesday, June 14, 2022, 04:13 PM IST
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Teji Mandi Explains: LIC halves investors’ capital |

What’s Happening?

LIC's share price has dropped over 28% to Rs 675 per share on the BSE. The company's issue price at the time of IPO was Rs 949 per share. At the time of the IPO, retail investors were allotted shares at Rs 905 apiece, whereas policyholders received allotment at Rs 889 per share. With this, LIC has lost Rs 1.2 trillion in market capitalisation since listing.

Anchor investors (especially domestic mutual funds) bought nearly 59.3 million shares a day before the IPO opened for subscription. As per SEBI’s rules, anchor investors had to hold the shares for at least one month after the allotment in the offer (May 13). Investors who bought these shares can now sell them a month later (June 13).


Analysts’ Take

According to analysts, private sector insurance companies have been growing faster than LIC and gaining market share. Also, LIC’s low value of new businesses (VNB), lower annual premium equivalent (APE) growth, and margin prospects underpin the insurance company. Private players have better growth, profitability, and higher return-on-embedded-value (RoEV) than LIC.

Should This Concern Investors?

The tumbling share price of LIC concerns not just investors but also the government. The company will continue to suffer as it loses market share due to its inability to move up in the customer segment. With bearish sentiment running in the market, many global factors are also affecting the insurance giant. Current issues are likely to continue this year which means further volatility in the LIC’s share price.

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