LIC IPO: Market Valuation Falls About Rs 42,500 Crore On Tepid Debut

LIC Listing: LIC lists at 8.11% discount at Rs 872 per share on NSE
LIC Listing: LIC lists at 8.11% discount at Rs 872 per share on NSE

India's biggest-ever IPO, state-owned insurance giant Life Insurance Corporation (LIC), listed its shares at a discount of over 8 per cent on the BSE and the NSE on Tuesday.

On the BSE, LIC launched at Rs 867.20 per share, a discount of 8.62 per cent from its mega initial public offering (IPO) allotment price of Rs 949.

The tepid listing has resulted in a sharp drop in the market capitalisation of the country's largest insurer. 

At the issue price of Rs 949, the market capitalisation of LIC stood at Rs 6,00,242 crore. At the listing price, the valuation of LIC dipped to Rs 5,57,675 crore, resulting in a loss of around Rs 42,500 crore.

The insurance behemoth's shares were last trading at about Rs 883, nearly 7 per cent lower than its issue price, but a gain of about 2 per cent from its listing price, as of 14:15 Indian Standard Time (IST). The share rose to a high of Rs 920 in the morning trade.

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Department of Investment and Public Asset Management (DIPAM) Secretary Tuhin Kanta Pandey on Tuesday said the weak debut of the country's largest insurer LIC on the bourses was due to unpredictable market conditions and suggested investors to hold on to the stock for long-term value.

Mar Pandey speaking at the LIC's debut occasion at the BSE, said, "This is a momentous event. LIC IPO is in line with the Prime Minister's vision. India is one of the most important emerging markets and it will be one of the fastest-growing economies in this decade."

"LIC Act was amended for the listing of IPO. Given the unprecedented size of the IPO special measures have been taken. Special drives were carried out to spread awareness for the policyholders. People enthusiastically participated and 73 lakh applications were received a record, and possibly it is the largest in the world ever while 50 lakh demat accounts were opened since then," he added.

On the NSE, LIC's listing price was Rs 872, indicating a discount of 8.11 per cent from the issue price. 

“Though LIC listing has been below the issue price of Rs. 949, given the attractive valuations and stability in the markets, we expect some buying interest in the stock both from retail and intuitional investors," said Hemang Jani, Head of Equity Strategy, Broking and Distribution, at Motilal Oswal Financial Services.

"Since large amount of money has been released post listing of LIC, part of this money could get diverted into equity markets,” he added.

Recently, financial markets have been whiplashed on stagflation worries as major central banks are poised on an aggressive interest rate hike path to combat multi-decade high inflation.

Emerging markets assets have taken a beating on foreign capital exodus driven by the dollar's appeal on a general increase in flight-to-safety trades.

Despite wild gyrations in global financial markets, LIC's IPO got an overwhelming response. The offer was oversubscribed nearly three times, led by policyholders who bid for over six times the shares on offer.

Indeed, India's largest public issue to date -- closed with nearly 3 times subscription, predominantly lapped up by retail and institutional buyers, but foreign investor participation remained muted.

The IPO was delayed from March due to market volatility and cut back by a third of the original target plan in the face of limited demand.

The listing comes as Indian equity benchmarks rose for a second consecutive session on Tuesday, while the rupee weakened to an all-time low.

LIC had fixed the issue price of its shares at Rs 949 apiece after a successful issue, which fetched Rs 20,557 crore to the government.

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

The government sold over 22.13 crore shares or a 3.5 per cent stake in LIC through the IPO, a third of its original target plan. The price band of the issue was Rs 902-949 a share. However, shares were allocated to investors on May 12 at the upper end of the price band.

“The 8% lower debut of LIC shares is a commentary on the current state of global markets rather than the company itself. In terms of subscription, the LIC IPO was extremely successful given the fact that it was the biggest IPO of India," said Mohit Ralhan, Managing Partner, TIW Capital Group.

"LIC has a solid business, trusted brand, and market leadership in an underpenetrated insurance market. LIC is a typical blue-chip company which is expected to give steady returns over a long period of time and therefore returns over a day is not relevant. It is expected to remain quite attractive for investors," he added.

(Except for the headline, this story has not been edited by NDTV staff and is published from a press release)