LIC shares face renewed selling pressure as anchor lock-in ends; fall 4.5%

Shares of Life Insurance Corporation of India (LIC) came under renewed selling pressure on Monday as anchor investors' 30-day freeze on shares ended. The stock declined 4.5 per cent and was trading at Rs 677.50 as of 11.50 am. Anchor investors hold over a fourth of LIC's public float.

Analysts said this week is likely to be a litmus test for LIC on whether the stock finds buying support from institutional investors like mutual funds at these lower valuations.  

So far, the stock has declined 28 per cent from its issue price of Rs 949.

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LIC had raised Rs 5,627 crore from anchor investors ahead of its mega initial public offering (IPO). The company currently has a market capitalisation of Rs 4.28 trillion.

The Securities and Exchange Board of India (Sebi) had deferred the implementation of the stricter 90-day lock-in period for anchor investors in the case of large IPOs (over Rs 10,000 crore in size) until July 1. Investors who subscribed to LIC's shares under the anchor category will have to adhere to only a 30-day lock-in period. The IPO had attracted a record 7.3 million applications. After factoring in rejections, 6.13 million applicants got an allotment.

The Rs 21,008 crore IPO, India's largest ever, was subscribed just 2.95 times. The government had decided to loower its dilution from 5 per cent to 3.5 per cent due to adverse market conditions. The Centre also drastically cut LIC's valuation from earlier estimates of Rs 12 trillion to just Rs 6 trillion.

Analysts said the stock might slide further due to the market conditions.

"LIC IPO was reasonably priced. But because of the market conditions, it opened lower and stayed lower. It's an uphill task for any stock that has opened lower and slid further to return to its issue price. The stock might go down further because of institutional selling. But I don't think the retail investors are selling. It's a good time to start buying LIC because the valuation looks more attractive as the stock falls. But one cannot expect an immediate bounce back," said Ambareesh Baliga, markets analyst.

The 30-day anchor lock-in for seven other companies ends between June 17 and 30. However, in the case of these companies, only half the shares allotted to anchor investors are free to be traded. The remaining half are subject to an additional 60-day lock-in under the new rules introduced by market regulator Sebi in April.