LIC Slumps 20% Over IPO Price As Anchor Lock-In Nears End

Life Insurance Corp.'s stock fell for the sixth straight session to a new low, ahead of the June 10 limit when the regulatory lock-in on shares allotted to anchor investors in the initial public offering ends.

India's largest life insurer has slumped more than 20% since its listing on May 17. The scrip closed with over 3% losses on Tuesday. Its market capitalisation has fallen below Rs 5 lakh crore. Since LIC's debut, investors have lost nearly Rs 1.2 lakh crore.

The selloff in LIC shares has intensified as the regulatory leash that bars anchor investors from selling is drawing to a close. This category, comprising large institutions who buy ahead of an initial public offering to generate demand, had cornered more than quarter of the shares sold.

The anchor lock-in has been raised to 90 days but SEBI eased the rules for LIC to keep it at 30 days applicable earlier.

The insurer had raised Rs 5,627.27 crore from anchor investors ahead of its Rs 21,000-crore IPO—the nation's largest. A total of 5.9 crore shares were allotted to 123 anchor investors at Rs 949 apiece—the upper end of the price band.

Its maiden offer was subscribed 2.95 times after the company pared the issue size amid global uncertainty.

Macquarie, in its note on the day of LIC's debut, had said “any investor who's taking an exposure to LIC is indirectly taking an exposure to equity markets and its inherent volatility”.

Macquarie argued that a large part of the embedded value of LIC is constituted by equity mark-to-market gains and hence a decline in equity markets could significantly affect the key valuation metric.

Macquarie is one the two research houses that initiated coverage of the stock. The other is Emkay Global. Both recommend a ‘hold'.

LIC, in its earnings release on May 30, had said the process of determining Indian EV is under progress and is expected to completed by June 30.

LIC registered a 6.1% year-on-year rise in net premium income in FY22. Its profit after tax rose 39.4% over the year earlier. Its also recommended a dividend of Rs 1.50 apiece, translating to a dividend payout of Rs 948.75 crore (nearly one-fourth of PAT) for the fiscal ended March 2022.