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LIC shares gain but still have some distance to cover to reach issue price

LIC shares gain but still have some distance to cover to reach issue price

By Sandeep Singh  May 18, 2022 5:48 PM IST (Updated)

LIC share price: Life Insurance Corporation shares edged higher on Wednesday — their second day in the secondary market. However, the LIC stock still has some distance to cover to reach its issue price of Rs 949.

Life Insurance Corporation (LIC) shares eked out a marginal gain on Wednesday, a day after the stock of the state-run insurance giant made a weak debut in the secondary market.

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The LIC stock rose by as much as Rs 14.6 or 1.7 percent to Rs 890 apiece on BSE — coming within 6.2 percent below its issue price — before settling at Rs 876.3 for the day. The stock remains in the discount zone compared to its issue price.
On Tuesday, LIC shares had begun their journey in the secondary market at a discount of eight percent to the issue price.
Manishi Raychaudhuri, Asian Equity Strategist-Equity Cash-Asia Pacific at BNP Paribas, told CNBC-TV18 that, in his view, the LIC IPO was attractively priced.
"Different IPOs come with the different fundamentals, different management quality and different market presence. I would not comment on specific IPOs or specific stocks, but the IPO index has gone down and has been secularly going down for more than a year. I think that has something to do broadly with foreign investor sentiment on the market," Raychaudhuri said.
"One trend that might emerge going forward is a slightly better or more reasonable pricing of IPOs that would leave a little more on the table for secondary market investors,” he added.
Macquarie has a 'neutral' call on the LIC stock with a target price of Rs 1,000. At the listing day closing price, the brokerage's target suggests a 14.2 percent upside in LIC shares.
Explaining the rationale behind the brokerage's take on LIC, analyst Suresh Ganapathy told CNBC-TV18: "One has to look at the fact that the embedded value obviously is the biggest component of valuation for LIC and the new business value accretion to the overall value for LIC is actually pretty low."
When you give a multiple on this new business, it moves the valuation for the private sector players but doesn't do the same for LIC, he explained.
Can investors expect LIC shares to enter premium territory soon?
Prashanth Tapse, Vice President (Research) at Mehta Equities, is positive on the state-run insurance behemoth's fundamentals and expects the stock to catch up going forward though he fears market volatility might play spoilsport.
"Given the mood of foreign institutional investors, it is difficult to assume any huge buying into the LIC counter... There may be a limited upside in LIC or other listed life insurance players in the short term," he told CNBCTV18.com.
He recommends those holding LIC shares not to panic looking at short-term volatility and use volatility as an opportunity to accumulate for the medium to long term.
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