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Stock Market LIVE Updates: Sensex gains 1,300 points, Nifty above 16,200; LIC trades at Rs 882/share on BSE


The company’s weak listing can be attributed to high volatility in the markets and negative market sentiments. LIC enjoys many competitive advantages like strong brand value, extremely large scale of operations, a huge network of agents, and an envious distribution network, further, the company’s issue was priced at a price to embedded value of 1.1x, providing a valuation comfort, so we suggest investors to stay with the company for the long term despite the negative listing. Those who applied for listing gains can maintain a stop loss of Rs. 800. New investors can take advantage of the dips to accumulate this share for the long term. We would like to add that the company’s further downside will be limited due to low float post listing.

Parth Nyati, founder, Tradingo





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LIC lists at 8.11% discount at Rs 872 per share on the NSE


NEW DELHI: Insurance behemonth Life Insurance Corporation of India saw a modest stock market debut on Tuesday when it listed at Rs 872, on the NSE, down 8.11% from its issue price of Rs 949 amid uncertain investor sentiment. Its shares debuted at 8.6 per cent discount at Rs 867 apiece on the BSE, a tad lower than the discounted value at which shares were offered to policyholders and retail investors.
What should investors do?
Analysts, however suggest investors, who got the allotment during its initial public offer, should hold the stock from a long-term perspective as LIC is the largest asset manager in India with AUM of Rs 40.1 lakh crore on a standalone basis as at December 31, 2021. Moreover, it has a dominant position in the underpenetrated life insurance market with improving the financialization of savings. Experts also said that the discounted listing is an opportunity to buy the stock at cheaper levels for those who didn’t get the allotment or didn’t apply to the IPO.
“The company’s weak listing can be attributed to high volatility in the markets and negative market sentiments. LIC enjoys many competitive advantages like strong brand value, extremely large scale of operations, a huge network of agents, and an envious distribution network, further, the company’s issue was priced at a Price to Embedded value of 1.1x, providing a valuation comfort, so we suggest investors to stay with the company for the long term despite the negative listing. Those who applied for listing gains can maintain a stop loss of Rs. 800. New investors can take advantage of the dips to accumulate this share for the long term. We would like to add that the company’s further downside will be limited due to low float post listing,” said Parth Nyati, Founder, Tradingo.
“The current market is not conducive for primary issues and LIC being the largest IPO has witnessed a negative listing, the current market volatility has weighed down on the insurance titan’s listing. However, the prospects for the insurance industry in India are good due to the under penetration of insurance and a long runway of growth; hence LIC will be the beneficiary in the long term. Those who applied for listing gains can maintain a stop loss of Rs. 800. New investors can take advantage of the dips to accumulate this share for the long term. Another point to note has that, LIC didn’t pay any dividends in the last financial year, so there are high chances that the company might declare a good dividend this year, thus making it a good dividend play,” said Santosh Meena, Head of Research, Swastika Investmart Ltd.
“LIC shares listed at discount of nearly 9% on Tuesday, and currently trading at Rs 901. In the bidding process policyholders and retail investors were given a discount of Rs 60 and Rs 45 per share, respectively. One who has invested for the long term can hold the position as the insurance business is long-term in nature. In the short term we may see some correction ahead of the market volatility. Those who missed can buy on dips for the long term only,” said Akhilesh Jat, analyst at CapitalVia Global Research.
The listing comes at a time when the stock markets are volatile amid inflation at an eight-year high and rising interest rates.
“Due to increased inflation statistics, FII {foreign institutional investment} outflows, currency weakness, geopolitical and rate hike-related worries, markets are experiencing extraordinary volatility which has caused sell-offs in equity markets all over the world,” said Aayush Agrawal, senior analyst at Swastika Investmart Ltd.
The IPO – India’s largest ever initial share sale, was open for subscription between May 4 and May 9. It was subscribed nearly 3 times, led by strong demand from the insurer’s policyholders and employees. About 70% of the insurance major’s anchor book was subscribed by domestic mutual funds.
We are recommending buying with a medium- to long-term perspective on an at-par listing, as valuation multiple of price-to-embedded value of 1.1 times on historic basis is attractive.” said Geetanjali Kedia, senior research analyst at SPTulsian.com.
Brokerage Macquarie has initiated coverage on the stock with a ‘neutral’ rating. The foreign brokerage has suggested a target for LIC at Rs 1,000, which hints at a modest 5.37 per cent upside over the issue price of Rs 949.
The brokerage said any investor, who is taking exposure to LIC, is indirectly taking exposure to equity markets and the inherent volatility that comes with it. It added that a 10 percent correction in the domestic equity market could lead to 7 percent fall in the embedded value of the state-run life insurer as against a 1-2 percent impact for private sector life insurers
Macquarie Securities’ analyst Suresh Ganapathy noted that LIC has consistently lost market share in the individual business owing to lack of product diversification and excessive focus on single-premium and group business.
The government had planned to list LIC in March this year but had to defer it as market conditions were not favourable in the wake of the Ukraine conflict.
The offering is seen as being important to India meeting its ambitious target for selling off state assets. The debut performance will also set the mood for forthcoming issues after retail investors were badly burnt by India’s recent large IPOs.
LIC offered a discount to employees and retail investors of 45 rupees per share, while policyholders were given a discount of 60 rupees per share. The shares were allotted to the successful shareholders on May 12 at the upper end of the Rs 902-to-Rs 949 price band.
The Indian IPO market, which saw dizzying growth in 2021, has had a significant slowdown this year. This shows the impact of geopolitical tensions, stock market volatility, a price correction in over-valued stocks from recent IPOs, plus concerns about rising commodity and energy prices, and slower economic growth, EY said in a report on Monday. However, if market conditions improve there could be a robust pipeline of IPOs this year as more than 20 companies have filed draft prospectuses in first quarter of this year, said Sandip Khetan, Partner and Financial Accounting Advisory Services Leader, EY India.
With inputs from Reuters
Watch LIC IPO debuts on stock market, LIC Share falls 6% on listing





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Faith of millions of small investors put to test with LIC debut


NEW DELHI: Millions of Indians investing in the country’s biggest listing could turn sour on the equity market if the stock follows the poor performance of its state-run predecessors.
Prime Minister Narendra Modi’s government raised $2.7 billion by selling shares in Life Insurance Corporation of India, including to millions of families nationwide that hold LIC policies. The stock starts trading Tuesday at a time when markets worldwide are being roiled by the fallout of Russia’s invasion of Ukraine and rising interest rates.
While deep-pocketed global funds can withstand volatility, small investors — especially first-time shareholders such as the ones created by by LIC’s listing — risk being burned if the stock underperforms. Of the 21 Indian state-run companies that debuted in the stock market since 2010, half are still trading below their issue price.
“The mood could turn sour if the market price falls,” said Amitabh Dubey, a political analyst at research company TS Lombard. “The government could face criticism.”
Headquartered in Mumbai, LIC is a household name in India, with 2,000 branches, more than 100,000 employees and 286 million policies. The 65-year-old firm has almost $500 billion in assets, 250 million policy holders and makes up almost two-thirds of the market.
“The emotional argument of LIC being a behemoth and its brand value need to be turned into profitability for retail investors,” said Subhash Chandra Garg, a former top bureaucrat at the Finance Ministry in the Modi government.
LIC’s offer was oversubscribed by nearly three times, with policyholders placing bids for over six times and the employee portion receiving orders for four times the shares reserved for them. While the anchor portion of the IPO drew in sovereign funds from Norway and Singapore, most of the shares went to domestic mutual funds.
Funds from IPO will be critical to bolstering government finances and meeting a deficit target of 6.4% of gross domestic product for the fiscal year that began April 1. The funds could also be used to give tax relief on fuel to individuals, who are struggling with inflation at an eight-year high.
LIC’s debut, which is expected to bolster Modi’s image as a reformer and energize other privatization plans, comes when capital-market activity has significantly slowed amid weakness in global equity markets. Foreigners have pulled out a record almost $25 billion from local stocks since the start of October. The benchmark S&P BSE sensex capped a fifth straight weekly loss on Friday, the longest run of declines since April 2020.
Modi’s popularity is unlikely to be impacted if LIC shares slide, while his Bharatiya Janata Party faces no substantial opposition and has won several key states. “The government’s popularity and image will be unscathed” as the fractured opposition can’t challenge the narrative that a listing will make LIC efficient and profitable, said Akshay Dhume, professor at the department of economics in Alliance University, Bengaluru.
A spokesperson for the prime minister’s office didn’t respond to requests for comment.
Smaller investors are expected to ride out any early price swoon, which is likely given that the so-called “gray market” is indicating that shares may slip 30 rupees from their IPO price of 949.
The bigger test will be how LIC stock performs over a longer period, which may be a disappointment if earlier state IPOs are any indication, including Coal India Ltd., General Insurance Corp. and New India Assurance Co. Ltd. GIC and New India Assurance, the two state-run insurers that were listed in 2017, have been the worst performers, trading about 75% below their IPO prices.
The tide has also turned for recently-listed companies. The S&P BSE IPO Index, a gauge of newly listed shares, has fallen nearly 26% so far this year. The country’s biggest IPO until LIC, Paytm, is the index’s worst performer, down 75% since its highly anticipated float in November.





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LIC IPO set to be delayed to next fiscal year


The mega initial public offering of Life Insurance Corporation of India is set to be delayed into the next financial year amid market swings triggered by Russia’s invasion of Ukraine, people with knowledge of the matter said.
Bankers and officials are preparing to shift the listing of the state-run insurer to after the current fiscal year, which ends in March, the people said, asking not to be identified because the matter isn’t public. A formal announcement could be expected this week or next, they added, with one person saying the sale may happen as soon as April if market volatility eases.
LIC’s underwriters have seen muted interest during early meetings with potential anchor investors, according to the people. Many fund managers have been wary of making major commitments amid the market volatility, the people said.
A finance ministry spokesman didn’t immediately respond to a call on his mobile phone. LIC declined to comment.
LIC’s IPO will be the biggest to be impacted by the war, which has wiped out 6% of BP Plc’s market value and over $3 trillion of global market capitalization since tensions started rising from Feb. 18. Prime Minister Narendra Modi had sought to raise as much as $8.7 billion from the deal, Bloomberg reported earlier, cash that is crucial to plug a gap in the budget deficit for the year through March 31.
Finance minister Nirmala Sitharaman said this week she “wouldn’t mind” taking another look at the timing of the LIC offering, though ideally she’d like to go ahead with it. Even if it doesn’t pursue the share sale on the original timeline, the government is still hoping to complete the IPO in the next few months, the people said.
The deferment will be another setback for India, which has massively scaled down its asset sale target after the delay in privatization of other state-run companies, including Bharat Petroleum Corp Ltd. Modi’s administration had hoped to shrink the shortfall to 6.9% of gross domestic product, with the LIC IPO accounting for some 3% of revenue.
The government had also penciled in a record market borrowing for the financial year starting April 1.
India had offered to sell a 5% stake, or about 316 million shares in the insurer in what was seen as India’s Aramco moment. Just like the Gulf oil giant’s $29.4 billion listing, the world’s largest, LIC’s debut would test the depth of the nation’s capital markets and global appetite for the state-owned entity.





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Air India sale kicks off privatisation drive, next up LIC listing: Official



By Sanjeev Miglani


NEW DELHI (Reuters) – The sale of national carrier Air India to conglomerate Tatas has opened the way for faster privatisation of state firms and the government is on track to list Life Insurance Corporation (LIC) early next year, a top government official said on Tuesday.





Tuhin Kanta Pandey, spearheading the drive to sell state enterprises or shut them down, said the government hoped to complete the valuation exercise of by November-December before filing the draft red herring prospectus for the planned by March.


Prime Minister Narendra Modi’s government is trying to reinvigorate the economy after its deepest contraction in decades through market-oriented changes and hoping to lure investment away from China and other countries.


Pandey said the deal with Tatas to sell Air India for $2.4 billion was complex and long in the making but provided confidence for the divestment of other state assets. A previous attempt in 2017 to sell the carrier that has been losing a billion dollars a year had failed.


“It has now come to fruition, it will give a fillip to privatisation going forward,” he said, adding that government managers were building expertise and experience to handle state sales.


“Selling state assets is not easy,” he said.


Several previous attempts at privatisation had only made fitful progress, caught up in bureaucratic tangles and resistance from politicians and unions.


But the Modi government had now fully embraced privatisation because it did not have the fiscal space to sink billions of rupees into loss-making state enterprises while trying to meet demands to build infrastructure and step up social welfare funding, he said.


“We feel the private sector has come of age, also the broader philosophy is it is not the business of government to be in business,” he said, adding that technology was changing too fast and constantly required funds for growth.


The government is expected to sell a 5-10% stake in and raise around 900 billion rupees in what could be India’s biggest listing. The company has long been considered a strategic asset, commanding more than 60% of India’s life insurance market with 36 trillion rupees of assets under management.


“This is going to be a major piece of reform,” Pandey said.


 


(Reporting by Sanjeev Miglani, editing by Ed Osmond)

(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

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LIC IPO: Govt may not need to amend any law to permit foreign participation



The government may not be required to amend any legislation to allow foreign participation in the proposed initial share sale of insurance giant Life Insurance Corporation of India (LIC), sources said.


Foreign participation would be allowed as per the listing norms of the Securities and Exchange Board of India (SEBI) and the extant sectoral guidelines, they added.


Apart from the government and Reserve Bank, foreign investment in the insurance sector is also regulated by the Insurance Act, IRDA Act and the rules made thereunder, which are implemented by sector regulator IRDAI.





The initial public offering (IPO) of would be also guided by IRDAI capital regulations.


If any clarification is required, the government can come out with amendments to relevant rules, the sources said.


To facilitate the listing of LIC, the government earlier this year made amendments to the Life Insurance Corporation Act, 1956.


As per the amendment, the central government will hold at least 75 per cent in for the first five years post the IPO, and subsequently hold at least 51 per cent at all times after five years of the listing.


The authorised share capital of shall be Rs 25,000 crore divided into 2,500 crore shares of Rs 10 each, as per the amended legislation. Up to 10 per cent of the LIC IPO issue size would be reserved for policyholders.


In her Budget 2021 speech, Finance Minister said the IPO of LIC would be launched in the financial year beginning April 1. Currently, the government owns 100 per cent stake in LIC.


Once listed, LIC is likely to become one of the biggest domestic companies by market capitalisation with an estimated valuation of Rs 8-10 lakh crore.


The Department of Investment and Public Asset Management (DIPAM), which manages the government’s equity in state-owned companies, has selected actuarial firm Milliman Advisors for ascertaining the embedded value of LIC for meeting the government’s disinvestment target.


Last month, appointed 10 merchant bankers, including Goldman Sachs (India) Securities, Citigroup Global India and Nomura Financial Advisory and Securities (India), to manage the mega initial public offering of the country’s largest insurer.


Other selected bankers include SBI Capital Markets, JM Financial, Axis Capital, BofA Securities, J P Morgan India, ICICI Securities and Kotak Mahindra Capital Co Ltd.


The Cabinet Committee on Economic Affairs had in July cleared the initial public offering proposal of LIC.


The listing of LIC will be crucial for the government in meeting its disinvestment target of Rs 1.75 lakh crore for 2021-22 (April-March).


So far this fiscal, Rs 9,110 crore has been mopped up through minority stake sales in PSU and sale of SUUTI stake in Axis Bank.

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

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