LIC lists at 8.6% discount, stock recovers partially post weak debut

LIC has now become the fifth most valuable listed Indian company with a market capitalisation of Rs 5.72 trillion on the BSE as of 10:08 am, the exchange data shows.

Shares of Life Insurance Corporation of India (LIC) listed at Rs 867.20 on the BSE, a 8.6 per cent discount when compared with its issue price of Rs 949 per share offered to qualified institutions and non-institutional buyers. On the National Stock Exchange (NSE), the stock opened at Rs 872, i.e. 8 per cent lower against its issue price.

The stock of India’s largest insurance provider company also listed 4 per cent below the shares issued at price of Rs 904 to retail individuals and employees and 2 per cent lower against the shares allotted to eligible policyholders at price of Rs 889 per share.

However, the stock hit an intra-day high of Rs 920 having recovered 7 per cent from its intra-day low of Rs 860.10 on the BSE. At 10:08 am; LIC traded at Rs 905.85, up 4.5 per cent from its opening level, but down 4.6 per cent as against its issue price of Rs 949 per share.

Post listing, LIC has now become the fifth most valuable listed Indian company with market capitalisation of Rs 5.72 trillion on the BSE, the exchange data shows.

The government had raised Rs 20,560 crore through LIC initial public offering on strong demand from local investors. The money will help the government bridge a budget deficit that’s expected to widen as commodity prices soar across the world.

LIC’s offer was oversubscribed by nearly three times, with policyholders placing bids for over six times and the employee portion receiving orders for four times the shares reserved for them. While the anchor portion of the IPO drew in sovereign funds from Norway and Singapore, most of the shares went to domestic mutual funds.

LIC is the largest life insurer in India, with around 61.6 per cent market share in terms of premiums (or GWP), and 71.8 per cent market share in terms of number of individual policies issued as of December 31, 2021.

The favourable demographic tailwinds supporting India’s growth story, combined with under penetration in life insurance. GWP for life insurers is forecasted to grow at 14-15 per cent CAGR in FY21-26 to reach Rs 12.4 trillion is among key triggers, analysts at ICICI Securities said in IPO note.

Adverse variation in persistency metrics could have a material adverse effect on financial condition. Interest rate fluctuations and volatility in capital markets may adversely affect profitability. There is significant technical complexity involved in embedded value calculations and the estimates used in the embedded value reports could vary materially if key assumptions are changed are key risks and concerns, the brokerage firm said.

Analysts at Jefferies believe, LIC’s listing will broaden investible universe and further raise sector’s relevance in investor’s portfolio. It will also help investors to better track sector dynamics as LIC disclosures become frequent. LIC has recalibrated its par and non par products ahead of the listing, the foreign brokerage firm said.