Weak LIC debut due to unfavourable mkt conditions: DIPAM
Department of Investment and Public Asset Management (DIPAM) Secretary Tuhin Kanta Pandey on Tuesday said the weak listing debut of the country’s largest insurer Life Insurance Corporation (LIC) on the bourses was due to unpredictable market conditions.
Investors should hold on to the stock for long-term value, he said. “Nobody can predict the market. We have been saying that it should not be held for a particular day but for more than a day,” Pandey told reporters after the listing of shares.
Domestic stock markets had plunged over 8 per cent since January this year due to the Russia-Ukraine conflict, US Fed rate hike, rising inflation and FPI outflows.
Pandey said there was some protection for retail investors and policyholders who got the shares at a discounted price. On the IPO, he said it was right-sized, considering the capital market environment, with the objective of not crowding out the capital supply.
He said the IPO received 73 lakh investor applications from all categories other than anchor investors. It received 10.85 lakh applications from first-time investors, of which, more than 7 lakh got allotment. As much as 46 per cent of the investors were from the western part of the country, 44 per cent from north and south, 9 per cent from east and north-east saw one per cent participation, he said.
The IPO was the third largest IPO globally in the year till date, he said, adding that the aggregate IPO in Europe was less than $3 billion during this year till date.
LIC Chairman M R Kumar said the response for the shares in the secondary market is going to be higher which will pull the prices up. “We were not expecting it to pick up as the markets were jittery… expect it to pick up. I am sure a lot of policyholders who had missed out in the IPO will pick up LIC from the market now. I don’t see why it should be tepid for too long,” Kumar said on the listing day share price movement.
Kumar said the insurer has already introduced a couple of non-participating and guarantee products in the last quarter of FY22 and now it plans to aggressively sell these products. The insurer may also look at launching some new products.
“We would like to push the plans that guarantee returns and give good profitability margins. Participatory products have always been our strength and we will work on that strength and also get into other segments,” he said.
LIC’s market share is 63 per cent and expects it to settle at the same level. “We are not going to lose it any more. I think there is enough room for growth,” Kumar said.
While LIC’s IPO had received good response from policyholders, foreign investors were not very enthusiastic about the offer. “That has been due to global sentiment which has really tested Indian investors. The way to look at it is, without FPIs, could any other issue have managed this? We saw six times (subscription) from policyholders… that is huge,” Kumar said.
Bids from foreign portfolio investors (FPIs) were to the tune of Rs 2,291 crore in the main book and they also invested Rs 555 crore in the anchor book, Pandey said.
On April 27, addressing the pre-launch media conference, Pandey defended the valuation, saying, “this is a fair and attractive valuation. Valuation is a discovery process. We want to champion LIC as a long-term value creator in the equity markets.”
LIC had offered a discount of Rs 60 for policyholders and Rs 45 for retail investors and employees.
The government was earlier keen on launching the LIC IPO in March 2022 to meet its revised disinvestment target for the current fiscal. The issue size was delayed and cut from the earlier proposed Rs 65,000 crore after Russia attacked Ukraine and US Federal and foreign investors started pulling out funds in the wake of rate hike plans of the US Federal Reserve market, sending financial markets into a tizzy.