LIC shares are yet to command a premium over the issue price of Rs 949. Paytm — whose IPO was the biggest of all time in India prior to LIC's listing — is at a discount of 73 percent to its issue price.
Life Insurance Corporation (LIC) shares are yet to command a premium in the secondary market — meaning the stock still has more ground to cover before it crosses the upper end of its IPO price range in the secondary market.
The newly-listed LIC stock has gyrated within a Rs 95 range between Rs 825 and Rs 920 after a weak listing amid a market-wide sell-off.
Over the past few years, India's largest public offers have largely debuted in the secondary market at a discount to the issue price.
Barring dry fuel giant Coal India and real estate developer DLF, all of the biggest issues of the country began their journey on the bourses at a discount. And going by the current market price, all of the biggies are yet to cross their issue prices — meaning yet to make it to the premium zone.
|Stock||Issue size (crore rupees)||End of listing day||Issue price||Listing day vs issue price (%)||CMP vs issue price (%)|
|Life Insurance Corp (LIC)||21,000||875.5||949||-7.8||-12.9|
|General Insurance Corp (GIC)||11,373||870.4||912||-4.6||-87.5|
|New India Assurance||9,600||725.1||800||-9.4||-87|
Can you expect LIC shares to cross their issue price soon?
Yash Gupta, Equity Research Analyst at Angel One, told CNBCTV18 that LIC, in his view, will take some big positive triggers for its stock to cross the IPO price. Until then, investors can expect rangebound moves in the stock and those with a long-term view can even look to buy at current levels, he said.
|Category||Subscription (No. of times the shares reserved)|
LIC's initial public offering (IPO) saw an overall subscription of three times the shares on offer, with strong interest from retail investors including employees and policyholders.
"When the stock price tries to rise from discount levels, earlier investors may opt to sell and take small losses, which could prevent the stock price from moving into a premium," Deepak Jasani, Head of Retail Research at HDFC Securities, told CNBCTV18.com.
"In case the valuation of the IPO seems on the higher side, especially post-results or other developments, fresh buying will be limited even at a discount to the IPO price. If the QIB portion (including the anchor portion) was well subscribed originally, the appetite to top up their holdings or fresh buying from new institutions could be limited unless genuine signs of financial turnaround are visible," he said.
So what can be the possible triggers for the state-run insurance major?
Life insurance companies derive revenue from two streams: the premium — which depends on the risk provisions to be made — and the income from float — which depends on interest rates and the stock market.
"The medium-term earnings catalyst for LIC is the income from float, especially for the amount invested in fixed income securities. With interest rates firming up, the public sector insurer may be among the biggest beneficiaries in the sector," Tanushree Banerjee- Co-Head of Research at Equitymaster, told CNBCTV18.com.
She, however, added that the insurer will continue to be in a tough fight with private sector peers in terms of insurance product innovation and collection efficiency even in the long term.
"It had to make a huge provision during the COVID quarters, some of which was written back in subsequent quarters and aided its profitability," Banerjee said.
Meanwhile, Macquarie has assigned a target price of Rs 1,000 to the LIC stock, which marks a premium of 17.4 percent over its issue price as of Friday's closing price.
According to Motilal Oswal Financial Services, LIC, with its dominant position, is well placed to capture the highly underpenetrated life insurance industry in India. The brokerage believes LIC's valuation is at a significant discount to its listed peers from the private sector.
First Published: IST