LIC falls 5.8% to hit record low as anchor lock-in expires

The stock settled 5.8% lower at Rs 668.20 on the BSE. As of Monday’s close, the market capitalisation of LIC stood at Rs 4.22 trillion, against Rs 6.02 trillion it commanded at the issue price of Rs 949 during the IPO.

The stock has continued to underperform despite the government trimming both valuations and the issue size.  
The stock has continued to underperform despite the government trimming both valuations and the issue size.  

Shares of Life Insurance Corporation (LIC) of India fell for the tenth straight session and hit an all-time low of Rs 666.90 on the BSE, after the minimum lock-in period for anchor investors ended on Monday. The stock now trades 29% lower from its issue price of Rs 949 set during the initial public offering (IPO). The stock settled 5.8% lower at Rs 668.20 on the BSE. As of Monday’s close, the market capitalisation of LIC stood at Rs 4.22 trillion, against Rs 6.02 trillion it commanded at the issue price of Rs 949 during the IPO.

As the anchor lock-in expired on Monday, investors were able to offload their shares in the open market, triggering a sharp fall in the stock price, said market watchers. The combined volume on the BSE and NSE was at 89.9 lakh on Monday, which was 2.5 times higher than that of the average volume in the last 10 sessions. The stock has continued to underperform despite the government trimming both valuations and the issue size.  

According to data on the exchanges, 59.3 million shares were allocated to anchor investors at Rs 949 per share ahead of the IPO, which fetched the government Rs 5,627 crore. Of the overall anchor book, more than 71% was held by domestic mutual funds, while demand from foreign investors remained muted.

An overall downtrend in the equity markets has also impacted the stock besides other factors. On Monday itself, the Sensex and Nifty declined over 3% each amid weak global cues. Prasant Bhansaali, director, Mehta Equities, said, “I believe anchor selling can be one of the reasons for the stock’s fall, followed by underperformance of equity markets, as lower market yields will have adverse impact on embedded value which constitutes marked-to-market (MTM) of unrealised equity gains or loss.” Lower market yields will have effects on Q1 earnings and hence markets are discounting the same in the price, he added.

According to analysts, despite being the country’s largest insurer, there are several aspects of its business that the market does not like. Further, it has also lost market share in last few years. Domestic brokerage firm Emkay Global in its note ‘The Elephant That Can’t Dance’, said, “While we appreciate LIC’s market-leading position and comfortable valuations, we prefer private sector peers that have better growth, profitability and therefore higher RoEV prospects.”

The government on Friday said it is ‘concerned’ about the recent decline in the insurer’s stock price and that the management of the company will look into these aspects. “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 Tuhin Kanta Pandey, secretary, DIPAM.

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