On the BSE, the stock was down 2.89 percent at Rs 689.20 at 10 a.m. Since May 17, the stock has lost 21.31 percent of its value. In the first hour of trading, the stock reached a new all-time low of Rs 682.
The Insurance Corporation (LIC) debuted on the stock exchanges on May 17 at a price of Rs 872 per share. After a successful Initial Public Offering (IPO) that was over three times oversubscribed, the government set the issue price of LIC shares at Rs 949 per share.
LIC shares have remained below the issue price since the day of listing, with lows of Rs 708.70 and highs of Rs 920.
Insurance is a long-term business; therefore wealth development and compounding occur only over time. One interesting observation that can be witnessed is that the low made on the first day of trade after the 30-day anchor investor’s lock-in period may act as strong support for a further rally for quality stocks. If fundamentals are strong it’s a good time to buy on such dips,” said Santosh Meena, Head of Research, Swastika Investmart Ltd.
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 Global had said earlier this month.
Highlighting the rationale behind the view, the brokerage says, “The state-owned insurer is underpinned by three factors: Low value of new business (VNB) relative to embedded value (EV), which limits the potential RoEV; lower annual premium equivalent (APE) growth and margin prospects versus private sector peers, as LIC’s higher commission costs and opex limit the scope for product and channel diversification; and inherent volatility in EV as 35 percent of non-par assets are in equity with no track record of EV movement under the new fund bifurcation structure.”
