Summary: India’s insurance goliath, Life Insurance Corporation of India, proved to be non-profitable for all categories of investors as its shares fizzled out on the bourses yesterday. Against expectations of a marginally lower listing, shares of LIC debuted on the BSE at 867 rupees, down nearly 9% against its issue price of 949 rupees. They further fell to a low of Rs 860, before settling the day at Rs 875 apiece. With this, LIC’s market cap stood at Rs 5.53 trillion at the end of its debut day. This means, investors lost roughly Rs 47,000 crore in the IPO, which valued LIC at Rs 6 trillion. However, analysts are unperturbed by the muted debut as they eye LIC’s long-term growth prospects. Girirajan Murugan, CEO of FundsIndia says LIC is a long-term play and recommends adding LIC to one's portfolio on dips. There may be a bit of selling initially due to overall market sentiment, he says, but BFSI stocks will rebound after geopolitical tension eases/ B Gopkumar of Axis Securities, too, opines that investors should not exit LIC’s stock at current levels as it is a play on the growth story of the under-penetrated life insurance industry. LIC’s sustained market leadership position, robust pan-India distribution network, and shifted focus towards profitable products will support margins and improve persistency ratios. All these factors will collectively make LIC an attractive pick from a long-term perspective. However, there’s more to LIC’s listing than what meets the eyes. Funds from IPO will be critical to bolstering government finances and meeting a deficit target of 6.4% of gross domestic product for FY23. LIC’s IPO was already slashed by almost 50% to ride the market volatility. And still, a tepid response to one of the most well-connected state-owned entities may prompt the government to re-think its divestment strategy. Speaking to Business Standard, UR Bhat, co-founder and director, Alphaniti Fintech says govt still has scope to sell further stake in LIC. Govt may consider OFS when market sentiment improves, he says, but BPCL divestment is complicated. "Government needs to clean the company, offer what investors want," he says. According to a Reuters report, the government is considering inviting bids for a 20%-25% stake in Bharat Petroleum Corporation, instead of an outright sale of its entire 52.98%. Similarly, it will likely put on hold the sale of state-owned helicopter service provider Pawan Hans indefinitely, as per a Business Standard report. The Centre has missed its revised divestment target twice in three years. Now, achievement of this year’s target looks difficult, too, which assumed the completion of the process to privatise BPCL and SCI, amid a market rout due to the spill-over effects of the ongoing war. Against this backdrop, Bhat expects the government to receive decent market proceeds from various stake sales as and when market conditions stabilise and the govt re-works bid offers as per investors’ interest. On Wednesday, investors will eye any rebound in LIC shares. Besides, they will also track March quarter results, and global cues for further market direction.
