Former Finance Secretary Subhash Chandra Garg on Tuesday said that the shares of Life Insurance Corporation (LIC), India's largest life insurance provider, were worth less than half the issue price.

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LIC shares listed at Rs 867.2 apiece on BSE, a discount of Rs 81.8 or 8.6 percent to the upper end of its issue price range of Rs 902-949 apiece. The LIC stock began its journey on NSE at Rs 872 apiece, a discount of Rs 77 or 8.1 percent.

In a tweet, Garg said it looked like LIC shares were rushing towards their right valuation.

LIC listed at a discount as suspected. 2 crore shares, about 10% of the issue, sold and bought in first 15 minutes. Possibly, there is sponsored buying. True value is less than half the issue price. Looks like LIC shares are rushing towards its right valuation.

— Subhash Chandra Garg (@Subhashgarg1960) May 17, 2022

Speaking to CNBC-TV18, Garg said, "The LIC has been sort of coming to the rescue of the government, both for subscribing to the borrowings of the state governments as well as the central government and also bailing out the issues from time to time. Now with some shares only about 3-3.50 percent going into the public hands, I don't expect this to materially change going forward. Of course, the public scrutiny, listing will bring some effect on the way the board and the investment committee of the LIC functions. But to expect that they will be a total departure and the fund management would be now every professional management and the LIC will not invest in the government bonds as well as invest in the government's IPOs etc. might be a little too much to expect."

Market expert Ajay Srivastava, CEO of Dimensions Corporate Finance Services, had a similar view on LIC. He believes that the public sector insurance behemoth won't make substantial gains for shareholders.

“It is difficult to believe that LIC will make substantial gains for shareholders in a market like this. Also, knowing one year down the line, the government will try to sell the next tranche of stocks, the overhang of supply remains,” Srivastava told CNBC-TV18.

Global brokerage Macquarie has a 'neutral' rating on LIC and sees a 5.4 percent upside in the insurer's stock from its issue price.

Naveen Kulkarni, CIO, Axis Securities, said that LIC's listing at a discount was expected given the wider market decline. Kulkarni, however, recommends holding the stock.

"Listing at a discount to the price, I think to some extent it was expected, considering the markets have come down from the level when the LIC IPO was talking about couple of months back... I don't think we need to book losses in this stock, definitely. There is great value in the stock. So, I would say hold on to stock at this point in time."

LIC's IPO, which was open for subscription from May 4 to May 9 to raise up to Rs 21,000 crore, received bids worth Rs 61,975 crore with strong participation from employees and policyholders. The government had fixed the issue price of LIC shares at Rs 949 apiece for allotment to investors.

LIC policyholders and retail investors have got the shares at a price of Rs 889 and Rs 904 apiece, respectively, after considering the discount offered.

Under the LIC IPO, the government offloaded 3.5 percent of its stake in the insurance behemoth. Even after a reduction in size, LIC's IPO is the biggest public offer of all time in the country.

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First Published:May 17, 2022 11:18 AM IST