After weak listing, can LIC stock prove to be a good long-term bet?

By Dustin Moskovitz On May 17, 2022

New Delhi: (LIC) made a less than expected debut on bourses as the stock listed at a discount, hurting all categories of IPO investors. LIC shares listed at Rs 867.20, a discount of 9 per cent, on BSE.

The listing price of

was non-profitable for all categories of investors, including policyholders who were given shares at Rs 889 apiece after a discount of Rs 60 per share, whereas employees and retailers were allotted shares at Rs 904.

However, the counter made a quick recovery to hit Rs 920 on BSE, before paring some gains to trade below Rs 900 levels during early hours.

However, despite the poor listing, a majority of market analysts are positive on LIC and suggest investors to hold them for the long term.

Ajit Mishra, VP- Research,

Broking, said despite reasonable valuations, LIC shares listed at a steep discount as the existing market conditions were not conducive for the insurance major.

“This is a solid opportunity for investors who want to make a fresh entry in the counter or add more shares if they have an investment horizon of more than one year,” he added. “LIC is likely to turn out to be a wealth creator in the long term.”

LIC IPO: How investors have reacted to biggest IPOs of the past on listing

Mega Issues

NEW DELHI: Before LIC, the top five IPO listings in terms of the issue size, had a mixed debut, with three of them, namely One97 Communications, General Insurance Corporation of India and SBI Card witnessing a listing at a discount to issue price. Here’s what happened to the five biggest IPOs of the past:

Paytm | Rs 18,300 crore

One97 Communications was listed on November 18, 2021. The scrip had a rather tepid listing, as it debuted at Rs 1,950 apiece on NSE, a 9.3 per cent discount to its issue price of Rs 2,150. On BSE, the scrip had got listed at Rs 1,955. The Rs 18,300 crore-IPO, the second-biggest so far (and the largest when it came) had managed to see 1.89 times subscription, led by QIBs and retail investors. As things stand, the stock trades at 72.48 per cent lower than its issue price of Rs 2,150.

Coal India | Rs 15,475 crore

The PSU was the biggest ever IPO in 2010. The IPO was sold between October 18 and October 21 that year. It generated bids worth $53 billion, which was more than the GDP of 140 countries as of FY10. It was almost 10 times India’s health budget for 2010-11, five times India’s education budget and one-fourth the size of the Union budget itself. The issue got listed on November 4, 2010, at Rs 291 on NSE, up 18.77 per cent over its issue price of Rs 245. On BSE, the scrip debuted at Rs 287.75, up 17.44 per cent.

Reliance Power| Rs 11,563.20 crore

This IPO was sold between January 15 and January 18 of 2008 and was subscribed about 70 times. Before Coal India, this IPO enjoyed the status of the ‘biggest IPO ever’ title. But the Rs 11,560 crore issue had another distinction. It was subscribed within the first few minutes of its book-building process. In fact, by the end of Day 1 of the bidding process, the issue had received over 10 times subscription. The IPO got listed on February 11, 2008. The scrip opened at Rs 547.80 on BSE, up 21.73 per cent against the issue price of Rs 450. It, however, settled below the issue price at Rs 372.50 apiece.

General Insurance | Rs 11,372.64 crore

General Insurance Corporation of India (GIC Re) in 2017 was the third biggest IPO of its time. The issue ran from October 11 to October 13 that year and was sold in Rs 855-Rs 912 price band. The issue received 1.38 times subscription and mainly sailed through due to QIB buying. Other investor categories went undersubscribed. GIC Re is the sole reinsurance in the domestic market. It provides reinsurance to the direct general insurance companies in the Indian market. The scrip got listed on October 25, 2017. On both BSE and NSE. the scrip opened at a 6.8 per cent discount to the issue price of Rs 912.

Insurance is a business of scale, and there is no company to match the scale of LIC, Santosh Meena, Head of Research, , said suggesting investors not be bothered about the negative listing and stay with the company for the long term.

“Those who applied for listing gains can maintain a stop loss of Rs 800,” he added. “New investors can take advantage of the dips to accumulate this share for the long term.” He believes LIC is a good dividend play for the current year.

Mohit Nigam, Head – PMS, Hem Securities said a majority of big IPOs have not given strong listing gains. He sees LIC as a long term play for existing investors, whereas short-term investors can wait to enter at a lower price.

“We believe that personal savings and awareness regarding insurance will increase enabling the sector to outperform in the long run and will indirectly benefit LIC as it is the market leader in this sector,” he added.

LIC is the largest insurance provider company in India, with a market share of more than 66 per cent in new business premiums. The company offers participating insurance products and non-participating products.

Nyati, Founder, Tradingo said that 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.”

LIC operates through 2,048 branches, 113 divisional offices, and 1,554 satellite offices. It operates globally in Fiji, Mauritius, Bangladesh, Nepal, Singapore, Sri Lanka, UAE, Bahrain, Qatar, Kuwait, and the United Kingdom.

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