The biggest IPO in India, LIC, is quickly losing its luster. Shares of Life Insurance Corporation have been sliding since its listing. In Friday's trading session, the stock hit an all-time low of ₹617. In the last week alone, the stock lost nearly 4% of its value, and in the last 11 trading sessions, the stock fell 5.04%.
The shareholders of LIC have lost about Rs. 2,06,807 crore following a 34.56% crash in the stock since its listing. The market capitalization of the stock came down to Rs. 3,93,193 crore (as of September 30, 2022) as against the valuation of Rs. 6 lakh crore during listing. Since its listing, the stock has never seen an intraday gain of more than 4%.
LIC make a weak debut on May 17, 2022, as it listed with an 8.62% discount to the issue price of ₹949, and on the same day, the stock settled at ₹875.25, which is 7.75% lower than the IPO price. And within a month after listing, the stock dropped to 654.55 levels. Since its listing, the stock has never traded above the issue price of ₹949. It is currently trading around ₹620, about 34.56% below its issue price.
LIC was India's largest initial public offering. The government of India raised about ₹21,000 crore by offering 221,374,920 equity shares, or a 3.5% stake in the company. The IPO was subscribed nearly three times, led by strong demand from the insurer's policyholders and employees.
Experts raised concerns over LIC's expensive valuation prior to its IPO. In the DRHP report, the company announced its EPS for FY19-FY21, which stands at an average of ₹4.38. Thereby, at the maximum price of ₹949, it is worth 202 times at the time of listing.
For the first quarter of FY23, the company posted a standalone net profit of ₹682.9 crore as against a net profit of ₹2.94 crore in the corresponding quarter of the preceding fiscal. However, its performance was disappointing on a quarter-on-quarter (QoQ) basis. The net profit declined 71.2 percent on quarter to ₹2,371.6 crore. while standalone total premium contracted 31.6 percent to ₹98,351.8 crore.
Moreover, LIC's net premium income increased by 20.35 percent year on year to ₹98,351.76 crore. Of this, individual new business premium income stood at ₹10,938 crore, renewal premium income at ₹49,069 crore, and group business premium income at ₹38,345 crore.
The market share of LIC moved to 65.42% in the June-ending quarter from 63.25% in Q4 of last fiscal. LIC's assets under management as on June 30, 2022, grew by 7.57% to ₹41.02 lakh crore as compared to ₹38.13 lakh crores as on March 31, 2022.
The value of the new business (VNB) came in at ₹1,861 crore for Q1FY23. Further, the VNB margin stood at 13.6% as on June 30th, 2022, which was down from 15.1% as on March 31st, 2022. The solvency ratio stood at 1.88 as against the regulatory requirement of 1.5.
As the stock is hitting new lows month after month, domestic brokerage firms are raising their bets on the stock after its Q1 performance. Axis Capital has initiated coverage on the stock with a 'buy' call with a target price of Rs900/share, indicating a potential upside of over 46 percent in the stock.
Axis Capital said that LIC is shifting to more profitable segments and is trading at a significant discount to its listed private peers, which are huge positives.
While another domestic brokerage firm, Geojit BNP Paribas, also gave a 'buy' call on the stock with a target price of ₹810 in its research report dated August 23, 2022.
LIC saw a recovery in its market share in the quarter gone by and will continue to maintain its dominant position in the life insurance domain for a very long time. Strong goodwill among the general public, government backing, and a robust investment portfolio remain favorable factors and ensure the company will continue to perform well in the long term, said Geojit BNP Paribas.
An average of 08 analysts polled by MintGenie have a 'buy' call on the stock.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie.
