LIC listing: Stock fall 8% after historic IPO; investors lose ₹46,000 cr

Life Insurance Corporation of India (LIC), the country’s largest insurer, lost over ₹46,000 crore of its value on its first day of trading, after making a tepid start on Dalal Street on Tuesday. The market capitalisation of the insurance behemoth dropped to ₹5.54 lakh crore against around ₹6 lakh crore at the issue price. LIC shares fell nearly 8% on their debut with 27.55 lakh shares worth ₹245.51 crore changing hands over the counter on the BSE.

The state-owned insurer, which raised ₹20,557 crore in the country’s biggest ever IPO, made a weak opening on Dalal Street, with stock price listing at a discount of over 8% against the issue price, in sharp contrast to the strong broader market trend. LIC shares, which admitted to dealings in the list of ''A'' group securities, listed at ₹867.20 on the BSE, down 8.6% from the upper end of the IPO price band of ₹902 to ₹949 per share. On the National Stock Exchange (NSE), the stock opened at ₹872 apiece, 8.1% lower than the issue price of ₹949.

Post listing, LIC shares hit an intraday high and low of ₹920 and ₹860.10, respectively, on the BSE, before closing at ₹875.45, down 7.75% against the issue price. In contrast, the BSE benchmark Sensex closed sharply higher, up by 2.54% at 54,318 points.

Despite its tepid debut, LIC of India became the fifth biggest listed firm in terms of market capitalisation after RIL, TCS, HDFC Bank, and Infosys. It ranks higher than many of the industry giants like Hindustan Unilever, ICICI Bank, SBI, HDFC, and Bharti Airtel.

The weak listing of LIC was in line with expectations as market sentiments remained fragile amid persistent concerns about the Russia-Ukraine crisis, higher interest rate hike, and boiling inflation.

Commenting on LIC listing, Shivam Bajaj, founder and CEO at Avener Capital, says, "Despite the reduction in the pre-IPO valuation of LIC, the scrip has still listed at a discount on the bourses which is in tandem with the diminution in insurance companies’ valuation and softness in the markets due to macro-economic constraints.”

Despite its weak listing, analysts remained optimistic on long-term growth, citing its strong dominance in the insurance sector. According to Bajaj, LIC can potentially see some buying interest from investors, given the attractive fundamentals, stability in operating metrics and expected recovery in the markets.

"Though LIC listing has been below the issue price of ₹949, given the attractive valuations and stability in the markets, we expect some buying interest in the stock both from retail and institutional investors. Since a large amount of money has been released post listing of LIC, part of this money could get diverted into equity markets,” said Hemang Jani of Motilal Oswal Financial Services.

Global brokerage firm Macquarie has initiated coverage on the LIC share with a 'neutral' rating. The agency has given a target of ₹1,000 per share, a potential upside of 5.37% over the issue price of ₹949.