LIC shares tumble in market debut after record IPO

Mumbai: Shares in Life Insurance Corp of India (LIC) slid nearly 8% in its market debut, a fresh setback for the state-owned giant as its record-breaking, oversubscribed IPO raised far less than expected for the government, Reuters reported.

India’s biggest insurer and largest domestic financial investor closed at 875.25 rupees, compared to the IPO price of Rs 949. LIC now has a market value of around $71.54 billion and is India’s fifth-biggest company, the report said.

The government, which had positioned the sale as the first and biggest of a wave of privatisations aimed at replenishing state coffers, raised roughly Rs 205 rupees, or around $2.7 billion, from selling a 3.5% stake in India’s largest-ever IPO.

That compares with a fundraising goal of around 300 billion rupees in April, which was in turn halved from earlier expectations after investors pushed back against lofty valuations. Initial government estimates had valued LIC at around 17 trillion rupees.

The stake sale in LIC will help the government to bolster its finances but will not be adequate to meet its divestment target of 650 billion rupees in this financial year.

“LIC has also been losing market share to private insurers so investors will be cautious. It was not expected to really give a huge premium on listing, but there is some disappointment on the listing discount,” said a fund manager with a domestic mutual fund which skipped subscribing to the LIC IPO.

Investment bankers are hopeful that the shares will bounce back in the coming days.

“We expect it to settle about 5-10% higher than the issue price after the initial volatility,” said a top investment banker to the LIC IPO.

LIC is the latest in a string of Indian companies that has fallen sharply after listing as investors looked closely at potential profitability and question valuations.

Fintech firm Paytm plunged in its debut last November following a $2 billion IPO, at the time India’s largest, and its shares now are worth not much more than a quarter of its IPO price.

Other big listings such as food delivery firm Zomato Ltd and cosmetics retailer Nykaa are also trading at large discounts to their IPO prices.

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% from 66% in 2019, according to data from the insurance regulator.

Large 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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