Shares of Life Insurance Corporation (LIC) of India fell for the fifth straight session on Monday to its all-time low by slipping below the Rs 800-mark. The stock hit its all-time low of Rs 775.40 on the BSE on Monday, down 3.1% from its previous close. The scrip ended the session lower by 2.8% at Rs 777.40 on the exchange.
The insurer’s market capitalisation slipped below Rs 5 trillion to Rs 4.91 trillion on Monday. The company is now the seventh most-valued company in terms of market capitalisation, data show. On listing, LIC was the fifth-largest company, ahead of HUL, with market capitalisation of Rs 5.53 trillion.
With Monday’s fall, the stock now trades lower by more than 17% against its issue price of Rs 949 set during the initial public offering. On May 17, LIC listed at Rs 867.20 on the BSE, down 8.6% against its issue price. Since listing, the stock has managed to settle higher in only four sessions. Moreover, it has so far failed to even scale above its issue price. The stock made its all-time high of Rs 920 on its listing day.
Analysts believe that the stock is expected to decline further as the lock-in period of 30 days for anchor investors will end mid-June. Ahead of the public offer, the insurer had raised Rs 5,627 crore from 123 anchor investors. Interestingly, over 71% of the total anchor book was subscribed by domestic mutual funds.
In a recent report, brokerage firm Emkay Global termed LIC as the “elephant that can’t dance”. “While we appreciate LIC’s market-leading position and comfortable valuations, we prefer private sector peers that have better growth, profitability and therefore higher return on embedded value (RoEV) prospects,” said the brokerage in a note dated June 1. It added that a very significant portion of LIC’s EV (embedded value) is sitting in the form of MTM (mark-to-market) gains in equity investments backing the non-par liabilities, taking the EV sensitivity to equity market fluctuations to a substantially higher level.
Brokerage firm Macquarie in its report dated May 17 had said a huge portion of the insurer’s EV consists of marked-to-market gains and any fall in the markets can significantly affect the EV. “EV is highly susceptible to equity market movements. A 10% fall in equity markets can erode EV for LIC by ~7%, much higher than private sector peers, where the impact is around 1-2%,” said Macquarie in its note.