Financial Rollercoaster: LIC Stock Decline Echoes Tata Motors’ Market Cap Turmoil
LIC’s market capitalization decline has matched the combined valuations of esteemed stocks like Tata Motors, Tata Steel, Mahindra & Mahindra, and JSW Steel.
New Delhi: The newly listed Life Insurance Corporation of India (LIC) witnessed a continued decline in its share value on Thursday, hitting fresh lows. The stock plunged by an additional 2 percent on Thursday, tumbling to Rs 723.7, before experiencing a partial recovery. LIC shares have now shed nearly one-fourth of their value since the issue price of Rs 949.
Even investors who benefited from discounts of Rs 60 and Rs 45, respectively, over the IPO price find themselves facing losses of up to 20 percent.
The state-owned insurer made its market debut with a capitalization of Rs 6 lakh crore, which has since dwindled to approximately Rs 4.6 lakh crore. The company’s market cap has decreased by over Rs 1.4 lakh crore.
As of June 9, 2022, Tata Motors’ market cap stood at Rs 1.42 lakh crore on the BSE.
LIC’s market cap decline has matched the collective valuations of leading stocks such as Tata Motors, Tata Steel, Mahindra & Mahindra, and JSW Steel.
Despite a lukewarm market entry last month, with a 9 percent discount on its issue price, LIC swiftly ascended to become the fifth-largest firm by market capitalization. However, it has now slipped to the seventh position, trailing behind ICICI Bank.
In comparison to its peers, LIC has suffered a more substantial erosion of wealth than its closest competitors, including HDFC Life Insurance (approximately Rs 1.25 lakh crore) and SBI Life Insurance (Rs 1.15 lakh crore).
In a recent note, Santosh Meena, Head of Research at Swastika Investment, emphasized the significant growth potential of India’s vastly underserved life insurance market.
“LIC boasts several competitive advantages, including a robust brand, an extensive agent network, and enviable distribution channels,” he remarked. “Long-term investors may consider acquiring this stock at its current market price and adopt a ‘buy on dips’ strategy.”
Emkay Global, a brokerage firm, has initiated coverage on LIC with a hold rating and a target price of Rs 875 per share. However, even if this target is met, policyholders may not fully recoup their losses.
“While we acknowledge LIC’s dominant market position and favorable valuations, we favor private sector peers with superior growth, profitability, and consequently, higher Return on Embedded Value (RoEV) prospects,” the report stated.