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LIC's woes may worsen as harried anchor investors' lock-in period ends

LIC's woes may worsen as harried anchor investors' lock-in period ends

By CNBCTV18.com Jun 13, 2022 12:43 PM IST (Updated)

LIC share price: The stock price of the recently listed Life Insurance Corporation of India further corrected - overall 30 percent from its IPO price - as the 30-day lock-in period for anchor investors ends on Monday.

The downtrend in Life Insurance Corporation of India (LIC) shares continued for the 10th straight session as stockholders remained jittery ahead of the end of the lock-in period for anchor investors in LIC's initial public offering (IPO).

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LIC shares dropped below Rs 700 apiece on Monday, losing 4.5 percent in a sharply weak market. LIC’s lock-in period for anchor investors is to end on June 13, which will allow them to sell their existing shares in the market.
Overall, anchor investors had bought 5.9 crore shares of the LIC at an issue price of Rs 949 per share ahead of its mega IPO, helping the PSU raise Rs 5,627 crore. As much as 71 percent of the LIC's anchor book was subscribed by domestic mutual funds such as SBI, HDFC, ICICI, and others.
At current market price levels, those who won allotment in the LIC IPO have lost more than a quarter of their investment in the last month. At 11.31 am, LIC stock was trading at Rs 678.30, down 4.42 percent, after opening at the day's high of Rs 690.90.
On BSE, LIC shares had listed at Rs 867.2 apiece, a discount of Rs 81.8 or 8.6 percent to the upper end of its issue price range of Rs 902-949 apiece. Given the tepid listing, India's former finance secretary Shubhash Chandra Garg had declared in a tweet that the true worth of the LIC shares is less than half the issue price.
The sentiment in LIC share price has turned adverse, with brokerages such as Macquarie and Emkay highlighting challenges to scale up its non-participatory policy business, and its ongoing market volatility hurts its embedded value.
"Inherent volatility in Embedded Value (EV) is another big challenge given a substantial portion of EV constitutes marked-to-market (MTM) unrealised equity gains," Macquarie India said in a recent note. It initiated coverage on the stock with a ‘neutral’ rating and a price target of Rs 1,000.
Emkay initiated coverage on LIC’s stock with a ‘hold’ rating and a price target of Rs 875. It said that LIC’s large size might be its biggest drawback.
“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,” Emkay said in a recent note.
LIC's January-March quarter earnings reported a drop in net profit by 17 percent year-on-year to Rs 2,409 crore, and this did not help the stock.
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