New Delhi: The initial public offering (IPO) of Life Insurance Corporation (LIC) continues to attract retail investors, including employees and policyholders, who are among the top bidders for the issue so far.
Despite falling premium in the grey market, intense selloff in the global markets, rate hike concerns and inflationary worries, LIC is holding its charm.
Majority of the market experts say that LIC is a long term play and investors should bid for the issue according to their funds and risk appetite. However, one should not bet on issues for listing gains only.
VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, said that listing gains are possible in LIC since valuation is attractive. Medium-term prospects also look good, he added.
“Many other stocks now look attractive after the correction. An important trend in the market is the preference for value stocks over growth stocks,” Vijaykumar said.
Even Ajit Mishra, VP Research. Religare Broking second the opinion and added the large issues are not for listing gains. One should invest in good companies for the longer term and LIC is among them.
“Investors should go all out over the issue, if the funds allow, despite the pessimism in the market as the valuations favour the insurance behemoth,” he added.
The government is valuing LIC at Rs 6 lakh crore, which is 1.12 times its embedded value (EV) of Rs 5.4 lakh crore. Embedded value is a measure of the consolidated shareholders value in an insurance company.
Santosh Meena, Head of Research, Swastika Investmart said that the valuations of LIC is at a discount compared to its listed peers. “Investors must understand that insurance is a long term business and this issue is a long term play only.”
However, other experts are skeptical over the issue due to current market conditions and low profitability of the company, which may dent its appeal compared to the peers.
Analysts said that broader markets are going through a much needed healthy correction and investors should look to buy the dips. However, the current round of correction is not over, the warning.
Some analysts are alarming investors to be cautious over the LIC issue. They say that investors should not go all guns blazing, considering the ongoing sentiment in the market. One should subscribe to the issue considering their risk appetite.
Astha Jain, Senior Research Analyst, Hem Securities said that the issue is getting good response and is expected to deliver mild listing gains. However, investors should trim their expectations amid the going correction.
“We would suggest that investors should bid for LIC but it is time to be wary of your risk appetite as the market conditions are not as attractive as earlier.”
LIC is the largest insurance provider company in India. Earlier, it was expected that the government would value the insurance behemoth at Rs 12 to 13 lakh crore, but global volatility weighed on the earlier plans.
A fund manager on the condition of anonymity said that the investors can be benefited through LIC only if the company works on profitability.
“The government has to sell its stake further, which might be a tedious task if the profitability does not improve,” he added. “However, if it does get the numbers on a favourable side, the street might be willing to give it a premium valuation over peers.”