LIC shares fall over 25% from issue price, investors lose around Rs 1.51 lakh crore after listing
Shares of life insurance giant Life Insurance Corporation of India (LIC) continued their bearish momentum for the ninth consecutive session and fell to a new all-time low during intraday trading on Friday.
LIC stock hit a new high of Rs 708.05 on the NSE and Rs 708.80 on the BSE during Friday’s intraday session. After its consecutive declines over the past nine sessions, the script is now down more than 25% from its issue price of Rs 949 each. Eventually, it closed at Rs 709.70, down 1.70% from its previous close on the BSE and at Rs 710.20, down 1.59% on the NSE.
The company’s market capitalization increased from Rs 6 lakh crore at Rs 4.49 lakh crore (Rs 4,48,885.09 crore) at the end of trading on Friday, according to BSE data. This means that LIC shareholders lost more than Rs 1.51 lakh crore in less than a month after listing.
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LIC went public on May 17, making a lackluster beginnings on Dalal Street. It listed at over 8% off its issue price despite a successful initial public offering (IPO) of Rs 21,000 crore which secured subscribed 2.95 times.
Speaking on the fall in LIC shares, Ravi Singh, vice president and head of research at Share India Securities, told indianexpress.com that he expects the shares to fall further to Rs 650 apiece. He advises investors to exit previous positions and wait for sentiment to turn around.
“Investors with high risk appetite can hold their positions. Over the long term, LIC’s trading metrics are expected to improve steadily. Investments made at lower levels will provide good long-term returns said Singh.
Vishal Wagh, head of research at Bonanza Portfolio, explained that the insurance giant was facing fierce competition from private players and was slowly losing market share. Speaking to indianexpress.com, Wagh said LIC’s premium prices are slightly higher than the competition, which has an impact on user behavior.
He further highlighted the low penetration across the country and said that although there is immense potential for growth and LIC has a larger market share, its online presence among insurance aggregators needs to increase by significantly to compete with private players.
Talking about the stock, Wagh said he thinks LIC shares are likely to bottom out at Rs 650-700 and stay in the range for some time.
Santosh Meena, Head of Research at Swastika Investmart, said in a note: “We believe India’s highly underserved life insurance market is still in its infancy and is well positioned to capitalize on the huge potential of growth. The company intends to address issues such as low VNB margins, loss of market share, heavy reliance on agency channel, etc. its global and Indian peers, and the current decline provides additional valuation comfort. Another point we would like to emphasize is that investors should be aware that insurance is a long-term business; therefore, the development and accumulation of wealth only occurs over time.