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LIC Shares Hit Fresh All-Time Low, Stock Down 32% Since Listing; What Should Investors Do?


Life Insurance Corporation (LIC) shares hit a fresh low after falling nearly 2 per cent on Friday morning. The scrip was down 1.71 per cent at Rs 657.90 at around 9:40 am.  The stock was listed on May 17 after Rs 21,000 crore initial public offering (IPO). The insurance behemoth had a market cap of around 6.5 lakh crore on listing that now stands at Rs 4.17 lakh crore. Since listing, LIC has declined 32 per cent from its issue price of Rs 949 a share.

The selloff in LIC shares intensified after anchor’s lock-in period ended. They comprise of large institutions who buy ahead of an IPO to generate demand and had cornered Rs 5,627.3 crore worth of shares in the Rs 21,000-crore IPO—the nation’s largest.

Norwegian wealth fund Norges Bank Investment Management and the Government of Singapore were among the subscribers to the anchor book. Alongside other global funds, domestic mutual fund houses such as HDFC mutual fund, SBI, ICICI, and Kotak also came in as anchor investors who subscribed to LIC IPO.

According to stock market experts, one can accumulate LIC shares at current levels as the stock is available at an attractive valuation but the time horizon for accumulation has to be long-term.

Naveen Kulkarni, Chief Investment Officer, Axis Securities, said: “LIC has corrected sharply owing to weak market sentiments and selling post the end of the anchor investor lock-in period. Amidst global weakness and market volatility, we are likely to see some pressure on the stock in the near term. Though LIC remains an undisputed market leader and valuations post the recent correction are comfortable, its lower share of Non-PAR products will hurt margins. Currently, they are significantly below its private sector peers. As the company looks to address these concerns and focus on improving the share of non-par products, LIC should witness improvement in margins and profitability. From a longer-term perspective, given the under-penetration of the life insurance sector, LIC has a fairly large headroom to grow. Improving product mix, margins, and overall profitability should drive valuations for LIC. Investors can hold on to the stock for medium to long term.”

Mohit Nigam, Head – PMS, Hem Securities, said: “LICI made a new 52-week low today and is trading around its all-time low. At these levels, the stock is available at 103 PE which still seems to be expensive though the Insurance sector trades at high valuation overall. We believe that existing investors can hold this stock in their portfolio for long run & new investors can take small exposure on further dips, again for a longer run. Stock is likely to be a slow-mover with lack of immediate triggers & strong competition from SBI Life, HDFC Life and ICICI Prudential. But overall Insurance space in India is likely to become bigger due to heavy under-penetration. Hence, holding a small part in a portfolio for a longer time is recommended.”

Last week, the government had said it is ‘concerned’ about the temporary dip in the insurance giant’s stock price and assured that the insurer’s management will look into these aspects and raise shareholders’ value.

“We are very concerned about the temporary blip in LIC share price. People will take time to understand (the fundamentals of) LIC. LIC management will look into all these aspects and will raise the shareholders’ value,” said DIPAM secretary Tuhin Kanta Pandey.

LIC Chairman MR Kumar, speaking on LICs stock market performance which remains an area of worry for its shareholders “Market itself is down which is affecting stock price, investors should not worry and wait patiently in the medium term. We are very conscious about the migration of shareholders after getting listed” he told ET Now in a recent interview.

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