LIC slips 4% as anchor investor lock-in ends; down 28% from issue price

Shares of Life Insurance Corporation of India (LIC) slipped 4 per cent to Rs 681.70 on the BSE in Monday’s intra-day trade with the lock-in period for anchor investors ending on Monday, June 13.

The state-owned insurance behemoth’s share price is down 28 per cent from its issue price of Rs 949 per share. At the time of the IPO, retail investors were alloted shares at Rs 905 apiece, whereas policyholders received allottment at Rs 889 per share.

The stock traded at its lowest level since market debut on May 17, 2022. It slipped for the 10th straight trading day and has declined 19 per cent during the period. With this, LIC has lost Rs 1.2 trillion market capitalisation since listing.

At 09:44 am, the stock traded 3 per cent lower at Rs 688.20, as against 2.7 per cent decline in the S&P BSE Sensex.

LIC had raised Rs 5,627 crore from anchor investors, with 71 per cent of the amount coming from domestic mutual funds (MFs). Overall, the state-owned insurance giant allotted nearly 59.3 million shares to 123 investors at Rs 949 apiece. CLICK HERE FOR MORE

Anchor investors are marquee institutional investors who are allotted shares in a company ahead of its initial public offer (IPO). The end of lock-in period will allow anchor investors to sell their existing shares in the market. Anchor investors hold close to 1 per cent of the 3.5 per cent free float of LIC. CLICK HERE FOR MORE DETAILS

LIC is the only public sector life insurance company in India and primary competitors are private life insurance companies.

Analysts believe that the private sector insurance companies have been growing faster than LIC and gaining market share, with no assurance that LIC will not lose further market share.

Analysts at Emkay Global Financial Services initiated coverage on LIC with a ‘hold’ rating and target price of Rs 875 – up around 12 per cent from current levels.

Highlighting the rationale behind the view, the brokerage says, “The state-owned insurer is underpinned by three factors: Low value of new business (VNB) relative to embedded value (EV), which limits the potential RoEV; lower annual premium equivalent (APE) growth and margin prospects versus private sector peers, as LIC’s higher commission costs and opex limit the scope for product and channel diversification; and inherent volatility in EV as 35 per cent of non-par assets are in equity with no track record of EV movement under the new fund bifurcation structure.”

Though analysts remain optimistic of LIC’s market leadership and comfortable valuations, they prefer private sector peers who have a better growth and profitability outlook, thereby, generating higher RoEV.

Dear Reader,

Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.

We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard.

Digital Editor