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Wednesday, July 6, 2022

LIC listing Today

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LIC listing Today , what should investors do with the stock after it lists

Life Insurance Corporation of India will make its debut on the stock markets on Tuesday, May 17, after a long-awaited initial public offering (IPO) that attracted overwhelming investor response and raised Rs.21,000 crore for the government.

LIC IPO listing Today
LIC IPO listing Today

The listing comes at a time when the stock markets are volatile amid accelerating inflation and rising interest rates. With shares in the state-owned giant in the de mat accounts of successful bidders, investors face the question of what do with the stock –- whether to exit at the time of listing if it lists at a premium, hold it for the short terms or treat it as a long-term investment.

Market experts are expecting a tepid listing for LIC because of the current upheaval in global equity markets, blamed on Russia’s February 24 invasion of neighboring Ukraine, supply-chain disruptions caused by the war, and interest rate increases by the US Federal Reserve and other central banks that have ended years of easy money.

“Due to increased inflation statistics, FII {foreign institutional investment} outflows, currency weakness, geopolitical and rate hike-related worries, markets are experiencing extraordinary volatility which has caused sell-offs in equity markets all over the world,” said Aayush Agrawal, senior analyst at Swastika Invest mart Ltd.

The government had for long been targeting an LIC share sale, which was delayed by the pandemic and unfavorable market conditions. When it was finally announced in April, the government trimmed the size of the sale and revised the expected valuation of the insurance behemoth

LIC IPO listing Today
LIC IPO listing Today

The government diluted 3.5 percent of its equity in LIC for Rs 21,000 crore. The sale received overwhelming response and was subscribed 2.95 times with policyholders leading the charge, followed by employees of the corporation and retail investors.

LIC is synonymous with insurance in India and enjoys a huge competitive edge in terms of brand value and an army of agents.. To be sure, there are concerns too about LIC losing market share to private insurer, its profitability and revenue growth, and its persistency ratio, which reflects the percentage of policyholders who pay renewal premium.

“The valuation at Price to Embedded Value of 1.1 had discounted the above concerns but nevertheless, investors must be aware that the business of insurance is long-term in nature and therefore we recommend investors to stay with the company for the long term even if the company lists at a discount,” added Agrawal.

Investors are also apprehensive about the performance of the stock looking at the returns delivered by other state-owned companies that have listed. They include the likes of Coal India and General Insurance Corporation of India.

LIC would be an outstanding stock to hold on to, but the investors should not expect a similar fate seen by the high-growth tech IPOs,” said Sonam Srivastava, founder of Wright Research, referring to tech-based companies that sold shares amid much hype, but are trading at below their offer price amid valuation concerns.

She believes that LIC has an exciting future ahead wherein many passive indices tracking India will include the stock in their baskets. “So our recommendation would be to hold on to these shares,” added Srivastava.

Nitesh Shah, CEO-wealth at Elara Securities, concurred. “Long-term prospects of LIC are very strong as it is the leading market player with more than 60 percent market share in life premium collection and listing of the stock will also make LIC the most valuable and one of the largest market cap companies on Indian Stock exchanges,” he said.

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