Jobaaj Stories
LIC's shares have been declining ever since it was listed, as investors fear for the future of the stock.
The government has said that it is concerned about the "temporary blip" in LIC's scrip.
"We are very concerned about the temporary blip in LIC share price. People will take time to understand (the fundamentals of) LIC. LIC management will look into all these aspects and will raise the shareholders' value," DIPAM secretary Tuhin Kanta Pandey said.
Previously, Jobaaj had reported about the lackluster performance of the stock alongside a few key points about the scrip. One week later, the share declined by another 11.3%. Today, the stock showed its worst performance since listing as it witnessed a massive gap down opening. Today's performance has brought up the total loss to 28.8%!
Earlier, the stock had challenged the Rs 800 level four times, only to respect it and turn around. The previous week, the stock broke through Rs 800 on the first day itself and remained below it throughout the week. Today, it has registered a lifetime low of Rs 676.00 per share and broke through the Rs 700 mark, wiping out well over Rs 1.51 lakh crore of its market capitalization.
More pain ahead?
One day before listing, LIC had allotted shares worth over Rs 5,600 crores to its anchor investors which consisted of several large names like SBI MF, Axis MF, ICICI MF, HDFC MF, GIC & BNP investment. According to SEBI rules for anchor investors, they were required to hold the allotted shares for 30 days after listing, which is set to end on Monday, June 13th, that is today!
With the anchor investors' holdings in the red, there is a risk of further decline in the shares since these funds could offload part of their holdings to minimize losses. This could greatly increase the supply of the already stressed share, thereby driving down the price even further.
Let's take a look at the fundamentals of LIC:-
- The company is one of the oldest companies in India and has been operating profitably for more than 6 decades.
- It has a strong brand value as it holds 62% of the insurance market share in India.
- The company is ranked 5th globally by Gross Written Premium (GWP) & 10th globally in terms of total assets and has the largest agent network in India.
- In FY22, LIC reported a net profit of Rs 4,043.12 crore from Rs 2,900.56 crore in FY21, up 39.4 percent on a year-on-year (YoY) basis.
- India's Life Insurance penetration is 3.2% against 7.6%-8.4% in other Asian countries. Moreover, the insurance protection gap in India currently stands at 83%, the highest in the Asia Pacific region.
- These represent strong growth opportunities for insurance companies and LIC being the largest will benefit the most from the upcoming insurance boom.
We at Jobaaj feel that the IPO came at a bad time. Existing geopolitical conditions and growing inflationary trends have made investors cautious. Our belief is that the stock is passing through a bad phase and that it could get worse. However, we feel that investors need to be patient and consider it a long-term investment since it is a company with strong fundamentals.
In the longer run, this stock may give great returns to its investors!
Report by Jobaaj group.
This news piece is brought to you in association with jobaaj.com
