LIC share hits fresh low as anchor investors' lock-in expiry nears; is recovery on the cards?

The free fall in LIC shares continued as they dropped to a fresh low of Rs 709.20 per share in Friday's intraday trade on the BSE. The fall in LIC stock for the ninth straight session also assumes significance in the backdrop that the mandatory regulatory lock-in period of anchor investors is about to end next week. 

The Shares of the India's biggest IPO have cracked over 25% against IPO issue price of Rs 949 per share. Besides, the relentless correction in the share has also wiped out one fourth of the market capitalization of the national insurer. Against Rs 6 lakh crore of market cap when the share debuted, the m-cap of LIC came crashing down to Rs 4.51 lakh crore as on June 10.  

As per Santosh Meena, Head of Research, Swastika Investmart Ltd, a revival may be on the cards. However, he said that investors should be aware that insurance is a long-term business and therefore wealth development and compounding occur only over time. 

"One interesting observation that can be witnessed is that the low made on the first day of trade after the 30-day anchor investor’s lock-in period may act as strong support for a further rally for quality stocks," said Meena. 

We believe India's highly underserved life insurance market is still in its infancy and is well-positioned to capitalize on the enormous growth potential, he said.  

"LIC has several competitive advantages, including a strong brand value, a massive network of agents, and an enviable distribution network. Further, the company has plans to address concerns with the company like low VNB margins, loss in market share, high reliance on agency channel, etc," said Swastika Investmart expert. 

Additionally, the company's issue was priced at a Price to Embedded Value of 1.1x, which was already at a discount compared to its global as well as Indian peers, and the current dip provides further valuation comfort, underlined Meena. 

"If fundamentals are strong it’s a good time to buy on such dips," he added.  

LIC's shares were listed on stock exchanges at Rs 865 per equity share on BSE, a discount of 9 percent against the issue price of Rs 949 per share. The issue had remained open between May 4 to May 9.