LIC Declines By 31%, and M-Cap Declines By $1.86 Billion Per Month Since Debut in Comparison To IPO Pricing. Do Investors Need To Worry?

According to market capitalization, LIC is now the seventh most valuable firm on the BSE.

 As a result, LIC shares on June 17 ended trading at 654.70 rupees a share, down 14.50 or 2.17 percent, on the BSE. The market capitalization of LIC is $4,14,097.60 at the current pricing level.

The Life Insurance Corporation of India was unable to overcome the market's negative savagery despite having a robust business portfolio, a positive growth outlook, and even maintaining its leadership position in the life insurance industry (LIC). Things were just beginning to seem gloomier for the equity market a month ago, when LIC shares went public. One month later, the market valuation of LIC has fallen by more than 31%, wiping out more than 1.86 lakh crore relative to the massive IPO issue price.

LIC shares reached a new lifetime low on Friday on the BSE of 651.30 per share. In response to soaring inflation, rising crude oil costs, a weak rupee, an unrelenting outflow of foreign funds, and the possibility of interest rate hikes, the equities kept widening their losses. 

As a result, LIC shares today on the BSE finished at 654.70 per share, down 14.50 or 2.17 percent. The market capitalization of LIC is $4,14,097.60 at the current pricing level.

According to market capitalization, LIC is now the seventh most valuable firm on the BSE. 

On May 17, one month prior, LIC made its market debut at a discount of more than 8% and was listed at a price of $872 a share on the BSE. After that week, LIC shares even reached a record high of 920 per share. In terms of market capitalization on the BSE, it was ranked as the fifth most valuable firm. 

The market was then in a bearish trend, and LIC shares entered a hot zone and incurred significant losses.

With a market valuation of $6,00,242 crore, the LIC IPO's issue price was $949. 

A month later, compared to the price of its first public offering, LIC shares have dropped almost 31%, and as of June 17, the market cap has been erased to the tune of 1,86,142.4 crore.

From May 4 to May 9, LIC launched its IPO at 21,000 crores. The problem is the largest in the IPO market's history in India. The IPO was successfully 2.95 times oversubscribed. 

Because of inflationary pressures, geopolitical unrest, a rise in the price of crude oil and other commodities, and indications of aggressive monetary policy tightening, many people would like to think that the LIC shares were issued at the wrong time. This is the main factor that prevented LIC shares from reaching their potential values. The banking and financial industries have undergone a significant correction as a result of the present market's risk-off attitude. Can we nonetheless label LIC a destructive of wealth?

Why LIC shares are declining?

"LIC's stock price decrease can be ascribed to the present risk-off sentiment in the market and the company's business inferiority when compared to its private peers," said Manish Jeloka, Co-head of Products & Solutions at Sanctum Wealth. 

LIC is not the only outstanding wealth-creating company to have experienced a protracted period of subpar stock price performance, according to Dr. VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

The chief investment strategist for Geojit continued, "FPI selling is the main reason why the banking sector is currently performing poorly. The financial sector's mood will improve as a result of this scenario. When market attitudes improve, LIC is also likely to fare better."

Vijaykumar continued, "LIC's performance was also hurt by the poor Q4 FY 22 results.

Should investors worry?

If the upcoming results show improvement, there may be new buying in the shares, driving up the share price, according to Vijaykumar. He went on to say, "The issue price for LIC, which was fair at 1.1 times embedded value, The current market price is appealing from that standpoint. Long-term investors who received an allocation during the IPO may purchase more shares at the present price to lower their average cost." 

Jeloka added in the meanwhile, "Since a long-term company improvement plan is in place, future performance should be improved. After the fall, valuations became even more appealing, giving investors a greater margin of safety."