Even a year after Life Insurance Corporation (LIC) went public, the company’s shares continue to trade at a significant 40% discount to the initial public offering (IPO) price of Rs 949 per share.
On Tuesday, LIC shares closed at Rs 567.40 on the BSE. Despite being a dominant player in the Indian life insurance market, LIC has struggled to regain its listing value.
LIC Shares Trading at 40% Discount to IPO Price
The decline in LIC’s share price can be attributed to various factors, including weak market conditions, controversies surrounding the Adani Group, and changes in tax policies.
Similar trends can be observed in several new-age IPOs such as Paytm, Cartrade Tech, PB Fintech, Nykaa, and Star Health and Allied Insurance, which are also trading below their IPO prices.
Although the Securities and Exchange Board of India (SEBI) has introduced stricter IPO disclosure norms, the market has yet to recover from the valuation shock experienced by investors. Despite these challenges, analysts remain optimistic about LIC’s valuations.
The stock is currently trading at an attractive valuation, offering a substantial discount compared to its industry peers. While short-term performance may be impacted by sectoral uncertainties, long-term investors can expect favorable returns.
LIC’s Consolidated Net Profit Has Shown Significant Improvement
Despite facing setbacks, LIC sees immense potential in the “Insuring the Uninsured” market. This not only presents opportunities for LIC but also for related entities like HDFC Life, ICICI Prudential, and SBI Life. Although there may be a slight growth slowdown due to concerns outlined in the budget, LIC remains a sound investment from a long-term perspective.
LIC’s consolidated net profit has shown significant improvement, reaching Rs 8,334 crore in the third quarter, primarily driven by enhanced premium income and strengthened shareholders’ funds. While the IPO received a positive response from policyholders, foreign investors displayed less enthusiasm.
LIC’s market capitalization, which was initially valued at Rs 6 lakh crore at the IPO price, has now decreased to Rs 358,880 crore.
Initially planned for March 2022, the LIC IPO was delayed and its size reduced due to global uncertainties caused by Russia’s conflict with Ukraine and the rate hike plans of the US Federal Reserve.
The government aimed to meet its disinvestment target for the fiscal year 2022-23 through the LIC IPO but had to adjust plans accordingly.
