LIC Stock Wipes: India’s biggest-ever initial public offering (IPO) of Life Insurance Corporation (LIC), which was touted as the next phase of the country’s insurance behemoth, “LIC 2.0”, has flopped since tepid listing at a discount on benchmark bourses, with losses worth nearly a third in valuation.
LIC’s stock fell on Friday to ₹ 661.70, down 3.2 per cent for the day, and over 30 per cent lower from its issue price of ₹ 949 per share, turning it into one of the top destructors of wealth among IPOs this year after experiencing a near $18 billion market value wipeout.
Indeed, to put the magnitude of losses in context, having plunged nearly a third in value since its May 17 debut, LIC IPO now ranks at the top in capitalisation loss since issue, starting with the discounted listing and continuous selling pressure.
That despite a mandatory lock-up period for anchor investors for the first 30 days.
Global brokerage JP Morgan initiated coverage on the stock with an overweight rating and has set a target price of Rs 849 per share in one year. JPMorgan said that LIC’s 0.75 times price to embedded value – is unduly harsh, even assuming no growth.
It said that in reality LIC has picked up growth recently and forecasted growth of 6% in FY22-24 for the insurer. “We believe the market views LIC as an equity market proxy and recent weakness in markets is overdone. We don’t foresee LIC trading at private sector valuations of 2-3 times P/EV (price to embedded value), but our March-23 price target of Rs 840 is based on 1 time FY23 P/EV, which we think is justified on a mostly par back book, excess assets on the B/S (balance sheet), and a 185% solvency ratio,” analysts at JP Morgan said.