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LIC Shares Surge Over 5% as Investors Buy at Lower Prices; Should you Invest for Now?


LIC Share Price Today: Life Insurance Corporation‘s (LIC) short journey as a listed entity has been far from certain. After the Rs 21,000-crore share sale earlier this year, the stock has lost about a quarter of its value. After a huge sell-off, the stock saw some buying on Wednesday. Also, LIC increased its stake in Hindustan Unilever Ltd, Hero MotoCorp and non-banking finance company Capri Global Capital through open market purchases over the last few months, the life insurer said on Tuesday.

Shares of LIC zoomed more than 5 per cent to Rs 709.70, before pairing up their gains marginally. On Tuesday, the counter had risen over a per cent to Rs 674.20, snapping the 10-day losing streak.

On Wednesday, the total market capitalization of LIC stood close to Rs 4.45 lakh crore, which was about Rs 1.55 lakh crore below Rs 6 lakh crore at the time of listing.

LIC’s share price has fallen sharply since its listing on the stock exchange on May 17, 2022. LIC shares were allotted to the investors at Rs 949 apiece and got listed at the stock exchanges at discount. The stock is about 25 per cent down from its IPO issue price of Rs 949.

The Rs 20,557-crore public offer (IPO of LIC was subscribed just 2.95 times. While retail investors got the allotment at Rs 905 per share, LIC’s policyholders allotted shares at Rs 889 per share.

When the LIC IPO was launched, analysts largely believed the downside would be limited, but had warned that the IPO timing could be a dampener, given that the broader markets had started witnessing pressure on the back of rising interest rates and sticky inflation. Since the launch of the IPO, benchmark Nifty has dropped nearly 8 per cent in value.

What Should Investors?

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.”

Santosh Meena, head of research, Swastika Investmart Ltd., said: “LIC has several competitive advantages, including a strong brand value, a massive network of agents, and an enviable distribution network. Further, the company has plans to address concerns with the company like low VNB margins, loss in market share, high reliance on agency channel, etc. Additionally, the company’s issue was priced at a Price to Embedded Value of 1.1x, which was already at a discount compared to its global as well as Indian peers, and the current dip provides further valuation comfort. Another point we’d like to make is that investors should be aware that insurance is a long-term business; therefore wealth development and compounding occur only over time. One interesting observation that can be witnessed is that the low made on the first day of trade after the 30-day anchor investor’s lock-in period may act as strong support for a further rally for quality stocks. If fundamentals are strong it’s a good time to buy on such dips.”

At around 02:40 PM, the shares of LIC were up over 2.5 per cent to Rs 691.75 per share on the BSE as against 0.1 per cent rise in the BSE Sensex at the same time.

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