- Date : 11/06/2022
- Read: 2 mins
The share price of LIC has dropped for the ninth consecutive trading session.
Insurance behemoth Life Insurance Corporation of India's share price has dropped for the ninth consecutive trading session, bringing the stock price down by almost 35% from its issue price of Rs 949. The current LIC share price dip is being accounted to the offloading by anchor investors as the regulatory lock-in period for the IPO comes to an end after 30 days of listing.
What does this mean?
Anchor investors comprise large institutional buyers, which in the case of LIC, were primarily domestic mutual fund houses. An estimated 99 different AMCs such as HDFC Mutual Fund, SBI Mutual Fund and Axis Mutual Fund purchased shares worth Rs 4000 crore through the anchor issue, who are now sitting on notional losses of more than 25% of their purchase price.
Owing to current market volatility and adverse sentiment associated with LIC’s capability to scale-up its non-participatory policy business, many fund houses will be seeking better investment opportunities triggering the LIC share price drop.
LIC share sell or hold?
Macquire Broking has given a ‘hold’ rating with a price target of Rs 1000. Conversely, Share India estimates the LIC stock price may drop further till 700 and advises investors to ‘exit’ from their current holding and re-renter when the sentiment changes.
Swastika Investmart Ltd suggests investors to ‘hold’ on considering insurance is a long-term business and wealth generation will only happen over a period of time. Additionally, LIC’s IPO was priced at 1.1x of its embedded value, which is already at a discount compared to its domestic and global peers.
In the meantime, LIC has registered an increase of 6.1% for yearly premiums and profit (PAT) of 39.4% over the previous year, totalling to Rs 3795 crore. A quarter of the profits amounting to Rs 948.75 crore will be distributed as a dividend to shareholders, or Rs 1.5 per share.