LIC's listing is really not a surprise if we look at the listing gains of the previous life insurance companies' IPOs
LIC, India's largest life insurance company got listed at Rs 865 per share, which is 9 per cent less than its issue price of Rs 949. While this may come as a surprise to many, we noted a pattern in which LIC fell into. Life insurance majors HDFC Standard Life, ICICI Prudential Life and SBI Life too had a similar muted debut in the market.
While there is no rock-solid reason for such a weak listing, an unfamiliar industry combined with huge issue size discouraged investors. LIC being a public sector undertaking (PSU) stock is also a reason since LIC was a vehicle for the government to save failing companies, which is not investor-friendly. But it is important that investors mustn't neglect the stock just because of a weak listing. Why so? Let's look at the table below:
As we can see, while the companies have given excellent returns in the long-run after their listing, they were all suffering during the listing period. In the meantime, their underlying business had grown, thanks to opportunities in the life insurance industry. You can check the Vis-a-Vis section of the April 2022 issue of Wealth Insight where we have compared all the three listed life insurance companies.
As per the CRISIL report in LIC's RHP, the total industry premium is expected to grow at 14-15 per cent CAGR in the next five years thereby presenting a great opportunity for the companies. Although after LIC's listing, there will be four major companies competing. Massive scope for opportunities is expected to help all the players grow.