LIC shares tumble on market debut after record IPO
1 min read 17 May 2022, 09:53 AM ISTLIC IPO, India's largest to date, closed with nearly 3 times subscription
PremiumAs expected, shares of Life Insurance Corporation of India (LIC) made a dull market debut on Tuesday with the stock listing at ₹872 apiece on the NSE, a discount of about 8% as compared to its IPO issue price of ₹949 per share. On the BSE, LIC shares started trading at ₹867. The stock rose to ₹886 apiece in early deals, however, was still below the issue price.
“The company’s weak listing can be attributed to high volatility in the markets and negative market sentiments. LIC enjoys many competitive advantages and 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," said Parth Nyati, Founder, Tradingo.
Nyati recommended those who applied for listing gains on LIC shares can maintain a stop loss of ₹800 whereas 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," she added.
The initial public offering (IPO) of the insurance behemoth closed on May 9, 2022 and shares were allocated to bidders on May 12. The government sold over 22.13 crore shares or a 3.5% stake in LIC through the initial share sale.
The price range for LIC IPO was set between ₹902 and 949 per share. However, shares were allocated to investors on May 12 at the upper end of the price band. LIC offered a discount to employees and retail investors of ₹45 per share, while policyholders were given a discount of ₹60.
The LIC IPO, India's largest to date, closed with nearly 3 times subscription, predominately lapped up by retail and institutional buyers, but foreign investor participation remained muted.
The state-run insurance giant had last month reduced its IPO size from 5% decided earlier due to the prevailing choppy market conditions. The proceeds from the LIC issue make up for about a third of the ₹65,000 crore disinvestment target of the government set for the current fiscal.
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.
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