One year of Listing: LIC share down 40% from IPO price; erodes nearly ₹2 lakh crore of investor wealth

It has been one year since the Life Insurance Corporation of India (LIC) shares were listed on domestic stock exchanges after the completion of its ₹21,000 crore worth initial public offering (IPO), the country’s largest IPO.

However, the listing of India’s largest IPO was jinxed as the stock debuted at an 8% discount and has never seen that IPO price since then. LIC share price has fallen around 35% from the listing price and 40% from the upper band of the IPO price. On Wednesday, LIC’s share price is trading around ₹567 apiece on the BSE.

The fall in LIC shares in the last one year is against 13.3% gains in the benchmark Sensex and 11.8% rally in Nifty50 during the same period.

LIC shares got listed on May 17, 2022, at ₹867.20, a discount of 8.62% to the issue price of ₹949 per share on the BSE. LIC IPO garnered significant interest from investors as the public issue was oversubscribed three times the issue size.

LIC’s market capitalisation at the time of listing was around ₹5.48 lakh crore, making it India’s fifth most valuable company. The company’s value has eroded by nearly ₹2 lakh crore and  now stands at ₹3.58 lakh crore, slipping to the 13th position.

The shares of LIC, the country’s largest insurer, came under pressure amid multiple headwinds such as weak market conditions, changes in tax policy and the Adani-Hindenburg row, analysts said.

“LIC has shown decent business performance and the stock’s embedded value looks good. But, the shares need a major trigger in terms of strong earnings growth and significant improvement in profitability,” said Avinash Gorakshakar, Head-Research, Profitmart Securities.

Gorakshakar believes LIC shares to remain sideways till there is much visibility in earnings growth.

“Where there can be near-term volatility in the LIC stock, long term investors can hold on to the stock,” he added.

In the third quarter ended of FY23, LIC’s consolidated net profit rose to ₹8,334 crore from ₹235 crore in the same period a year ago led by improvement in premium income.

Meanwhile, some analysts flagged concerns over the Union Budget proposal to remove tax-free status on certain life insurance policies with a premium above ₹5 lakh, terming it negative for the sector in the short term. However, analysts also believe that the insurance sector will continue to grow considering the long-term business dynamics outweighing short-term tax overhang.

“The life insurance sector should be seen with a long term horizon. After COVID-19 pandemic, the entire approach for the sector has changed from ‘tax-saving’ to ‘getting secured’ and there is a huge market for ‘insuring the uninsured’. And LIC is a strong player in this sector,” said Gauang Shah, Senior VP, Geojit Financial Services.

“For over 2 years’ horizon, we believe there are huge opportunities for not only LIC but also for the other insurance players like HDFC Life, SBI Life and ICICI Prudential,” Shah said adding that LIC IPO investors can buy more LIC shares at lower levels and average their price and hold hold for a long term.

At 11:55 am, the shares of LIC were trading 0.11% lower at ₹566.80 apiece on the BSE, boasting a market capitalisation of ₹3,58,500 crore.

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