InvestorQ : I am an investor in the LIC IPO, so can you tell me why has the stock fallen so much? Was the stock overpriced in the first place?
Dhwani Mehta made post

I am an investor in the LIC IPO, so can you tell me why has the stock fallen so much? Was the stock overpriced in the first place?

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Dilmini Mercia answered.
8 months ago
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On Friday 10th of June, the stock price of LIC touched a new low price of Rs708. Effectively, the stock has now corrected a full 25.4% from the IPO price. For the retail investors, who got the IPO allotment at a discount price of Rs904 per share, the current price is still a discount of 21.7%. Even for the policyholders of LIC who got the IPO allotment at a deeply discount price of Rs889, this still translates into a discount over IPO price of 20.4%. In short, despite the generous discounts, it does look like a case of overpricing the public issue.

In the process, the market cap of LIC has dipped from Rs6 trillion to just about Rs4.45 trillion, implying that along the way the company has actually wiped out Rs.1.55 lakh of shareholder wealth. In the last 9 days to 10 days, with the anchor holding expiry period approaching, the stock has been in the midst of a relentless fall. FIIs are still net sellers and that is likely to continue amidst global hawkishness. Also, FPIs have not been very keen buyers in the LIC IPO and that disinterest is continuing despite lower prices.

There is one more angle to it. Most retail investors have LIC shares and hence fresh buying is not visible. Many of the domestic funds that invested in the anchor portion are sitting on huge MTM losses and are unlikely to commit more funds to the stock at this juncture. Also, the sentiments of the stock are still weak and may get accentuated as anchor portion lock-in completes next week. Surely not happy times for the stock or for the investors.

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