LIC shares trade higher a day after listing! What should investors do? 

Shares of state-owned Life Insurance Corporation (LIC) were trading over 1 per cent higher at Rs 883.10 on BSE. On Tuesday, the stock ended at Rs 875.45, 7.75 per cent lower than the IPO issue price of Rs 949 on BSE. 

LIC made a tepid market debut, listing at a discount of 9 per cent against the IPO issue price. However, it became the fifth-largest firm by market capitalisation post its market debut. The market cap of the firm rose to Rs 5.70 lakh crore post listing on BSE. 

B Gopkumar, MD & CEO, Axis Securities said, "While LIC debuted at a slight discount to its issue price, investors should not look to exit at current levels and hold the stock from a medium to long-term perspective." 

"We believe LIC continues to be a solid bet in the long run as it is a play on the growth story of the under-penetrated life insurance industry. Its sustained market leadership position, robust pan-India distribution network, and shifting focus towards profitable products, thus supporting margins and improving persistency ratios, will collectively make LIC an attractive pick from a long-term perspective," he added. 

Santosh Meena, Head of Research, Swastika Investmart Ltd. India’s largest insurance company has debuted at Rs. 872 which is 7 per cent below its issue price. 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, he noted that 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 being the largest player will be the beneficiary in the long term. Insurance is a business of scale, and there is no company to match the scale of LIC, so we suggest investors not be bothered about the negative listing and stay with the company for the long term, he said. 

"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," he further added. 

The IPO was subscribed 2.95 times on the final day (May 9). The share sale received bids for over 47.83 crore (47,83,67,010) shares against the total issue size of over 16.20 crore (16,20,78,067) shares. While the portion meant for policyholders was subscribed 6.1 times, the employees' portion was booked 4.4 times. 

Brokerage firm Macquarie also initiated its coverage on LIC with a 'Neutral' stance and has a target price of Rs 1,000. Following its recent reorganisation, the company is set to increase its share of non-participating pure protection products which currently form just ~5-6 per cent of its overall product portfolio, it said. 

However, it noted that the ability to sell high-margin non-par products - as opposed to par products that provide policyholders a significant share of policyholder’s surplus - will require a change in the mindset of the organisation and its agency force, which could be LIC’s biggest challenge.