Life Insurance Corporation of India (LIC) shares made a tepid debut on the stock exchanges today, listing at a discount to the IPO price. Shares of the insurance behemoth started trading on BSE and NSE on Tuesday morning at Rs 872 per share, down 8.11% from its IPO price of Rs 949 per share. Shares traded lower even as benchmark indices Sensex and Nifty were in the green on Tuesday. LIC’s Rs 21,000-crore public issue is the largest ever witnessed by Dalal Street. The issue had garnered a strong response from all investor categories earlier this month on a massive six-day subscription window, unlike the usual three-day window.
On listing, LIC had a market capitalisation of Rs 5.5 lakh crore, placing it among the top 5 listed companies in the country by market capitalisation. LIC’s IPO had come in during a turbulent period for Dalal Street and at a discounted valuation to what was earlier proposed. The government of India has sold just 3.5% stake to the public via the issue, down from 5% that was earlier discussed.
No large losses for Retail, Employees, and policyholders
In the grey market, prior to the listing of LIC shares, the stock was trading at a marginal discount. Analysts were also mixed in their expectations. However, LIC had given discounts to retail investors, its employees and LIC policyholders. Taking the same into account the break-even price for retail investors and employees of LIC stood at Rs 904 per share, 5% lower than the issue price. Meanwhile, policyholders of LIC were given a Rs 60 per share discount, leading to a break-even price of Rs 889 per share. Considering the listing price of Rs 872 per share, policyholders, retail investors, and employees of LIC are not staring at large losses. However, QIBs and NIIs got no discounts and hence the weak listing does eat into their investments more.
Strategy for investors
Analysts had advised investors to book any listing gains but in case of a discounted listing, analysts at GEPL Capital advise investors to hold. “We advised investors should hold on to the shares if listed at discount and accumulate more as the Mcap/EV ratio of 1.1x will be attractive more than what it was in the primary market and it may also attract new participants after listing cheaper,” they added.
Although LIC listing has been below the issue price of Rs 949, buying interest can be expected. “…. given the attractive valuations and stability in the markets, we expect some buying interest in the stock both from retail and intuitional investors. Since large amount of money has been released post listing of LIC, part of this money could get diverted into equity markets,” said Hemang Jani, Head – Equity Strategy, Broking and Distribution, Motilal Oswal Financial Services.
With LIC’s discounted listing it has continued with the curse on large IPOs on Dalal Street. Previous mega IPO, One 97 Communications (Paytm) too had witnessed a gap-down the start and has not recovered to date. Reliance Power, another mega issue is infamous for poor performance.