LIC IPO: shares slid 6% on debut day, raises concern
By MYBRANDBOOK
In a fresh setback to their market debut on Tuesday, Life Insurance Corp of India’s (LIC) shares slid six percent, raising far less for the government than initially envisioned.
The state-owned insurer was trading at 887 rupees ($11.7) as of late morning, giving it a market value of about 5.6 trillion rupees ($72bn) and making it the country’s fifth-biggest company.
The shares plunged as much as 9.4 percent to 860 rupees ($11.4) in Mumbai, versus their IPO price of 949 ($12.5), before paring about half of the losses.
“We were not expecting a big listing as markets were jittery, expect it to pick up,” LIC’s Chairman MR Kumar told reporters.
The weak debut of LIC, which happens to be India’s biggest insurer and largest domestic financial investor, comes even as stocks in India and the broader Asian market rallied on Tuesday. The sale of equity in the 65-year-old behemoth was oversubscribed nearly three times, riding on the enthusiasm of policyholders who received a 60-rupee discount and bid multiple times for the shares on offer.
The government, which had positioned the sale as the first and biggest of a wave of privatisations, raised roughly 205 billion rupees ($2.7bn) from selling a 3.5 percent stake in India’s largest-ever IPO.
LIC’s IPO is the fourth-largest deal among global IPOs priced this year. It comes when there is a dearth of large-size offerings in financial hubs from New York to London and Hong Kong. There has not been any listing exceeding $1bn in Hong Kong or Europe so far this year.
LIC is the latest in a string of Indian companies that have fallen sharply after listing as investors looked closely at potential profitability and questioned valuations.
LIC dominates India’s insurance sector with more than 280 million policies. The 66-year-old company was the fifth-biggest global insurer in terms of insurance premium collection in 2020, the latest year for which statistics are available.
Amid fierce competition from rivals such as HDFC Life Insurance Company Ltd and ICICI Prudential Life Insurance Company Ltd, LIC’s market share has dropped to 63 percent from 66 percent in 2019, according to data from the insurance regulator.
Investors have also been concerned that LIC’s investment decisions, including those in loss-making state companies, could be influenced by government demands.
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