LIC IPO’s Weak Debut: Investors Disappointed, But Long-term Hope Floats

The much-hyped Life Insurance Corporation (LIC) of India shares made a weak stock market debut on Tuesday.  LIC shares opened for trading at Rs 872 on the National Stock Exchange (NSE) against its issue price of Rs 949, a decline of 8.11 per cent or Rs 77 from the issue price. The price finally settled at Rs 875.25 at closing. LIC policyholders and retail investors have got the shares at a discounted price of Rs 889 and Rs 904, respectively.

The good news is that a large section of investors seems to have matured now and understands that equity is a long-term game. The weak debut was disappointing but didn’t come as a shocker for them. However, the expectations of some investors who had pinned high hopes may have tumbled. Outlook Money caught up with some investors to find out.

It Wasn’t A Shocker

Given that the market has been falling in the bear phase for some time now, this was not completely unexpected. Several investors are blaming it on the current market conditions.

“LIC IPO was listed at Rs 867 with a discount of Rs 8.62 per cent. As an investor I am very disappointed but as per last week’s market situation, I was expecting the same,” says Hemant Bhardwaj, 51, who works in a Delhi-based account firm.

Pratik Banerjee, a 39-year-old businessman based in Kolkata believes that LIC could not deliver listing gains because of weak market sentiments. “LIC opened in a lower price band, I perceive it as due to current market volatility.”

“With the current market conditions around the world and inflation numbers skyrocketing, a bumper listing of LIC wasn't expected, the stock is not like a new tech company which would scale in a disproportionate manner,” says Mumbai-based Ashish Katariya, 26, who is a corporate employee.

Long-Term Hopes Remain Afloat

Hopes for LIC’s long-term performance remain afloat.

Bhardwaj hopes that being the largest insurance provider, the share price will go up in the long term. “As per the market cap of LIC, which is fifth largest in India and leading market player of stock market, the share will go up in the future. It is better to hold and treat it as a long-term investment,” says Bhardwaj.

Banerjee feels the same and plans to hold the stock for the long term. “The insurance sector is one of the booming sectors where LIC has the maximum penetration and market share. In the long term, it will help us make profits,” says Banerjee, adding that he was not looking for immediate gains.

Katariya wants to wait and watch as he believes that LIC is an established brand. “I was waiting for the IPO since the last two years considering its brand value. My vision wasn't to make listing gains and I am confident about LIC. It would surely be a great blue-chip stock and give good returns and decent dividends in the long run,” he says.

Reality Check for Many

However, for investors, who were harbouring unrealistic dreams, LIC’s loss, though meagre, would have been disheartening. Praveen Goutam (34) had a plan to start a cab business from IPO proceeds. For a person like him, immediate dreams have shattered but hope still floats. Reads more here.