Shivani Bhati | May 17, 2022 |
On the NSE, LIC shares finish 8.01 percent lower than their issue price after a dismal start
On Tuesday, the shares of insurance giant Life Insurance Corporation of India (LIC) launched on the stock markets at a discount of more than 8% to their issue price. On the BSE, the LIC stock started at Rs 867.20 per share, down 8.62 percent from the issue price of Rs 949. It started the day 8.11 percent down at Rs 872.00 a share on the National Stock Exchange (NSE).
The LIC shares achieved a high of Rs 920.00 on the BSE and Rs 918.95 on the NSE, both below the issue price. The stock fell to Rs 860.10 on the BSE and Rs 860.00 on the NSE on the downside. On the BSE, it ended up at Rs 875.45, down Rs 73.55 (7.75%) from the issue price, while on the NSE, it ended up at Rs 873.00, down Rs 76 (8.01%). According to statistics from the BSE, the company’s market capitalization was Rs 5,53,721.92 crore.
After a gruelling 6-day subscription process from May 4-9, the Rs 21,000 crore blockbuster initial public offering (IPO) of LIC was subscribed 2.95 times. The price of a LIC issue was set Investors will be allocated shares at Rs 949 each. After the markdown, all policyholders and retail investors received the shares at a price of Rs 889 and Rs 904 per share, respectively. Policyholders received a discount of Rs 60 per share, while retail investors and LIC personnel received a discount of Rs 45 each.
What Analyst have to say?
According to Vinod Nair, Geojit Financial Services’ Head of Research, in the first half of listing, “the LIC listing was more muted than expected, given the decline in market dynamics from the IPO’s opening to the listing date. The listing price has dropped in lockstep with insurance sector values, maintaining a 70 percent discount to the industry average. Positively, the stock was purchased at a low price. Given its strong market position, improved future profitability owing to changes in excess distribution standards, and robust industry development forecast, we believe LIC is a good investment opportunity in the short to medium term. When there is a market rebound and favourable performance in the insurance sector, LIC can do well.”
TIW Capital Group Managing Partner Mohit Ralhan says that, “LIC’s 8% lower initial public offering reflects the current status of global markets more than the firm itself.” Given that it was India’s largest IPO, the LIC IPO was exceptionally successful in terms of subscription. In an underserved insurance market, LIC has a strong business, a well-known brand, and market leadership. LIC had a market share of roughly 75% for individual insurance and 81 percent for group plans in FY-21. It is by far the most successful life insurance firm. India’s insurance business is developing at a pace of roughly 15% per year, and this growth is projected to continue for a long time given the country’s low insurance penetration in India’s GDP growth rate is a pitiful 3.2 percent, compared to more than 8% for developed countries and around 5% in China. Because LIC is a typical blue-chip firm that is anticipated to provide consistent returns over a lengthy period of time, daily results are irrelevant. Investors are anticipated to find it quite appealing.”
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