LIC shares tumble in muted market debut

Insurance giant becomes India’s fifth-largest firm by market capitalisation

Shares of the Life Insurance Corporation of India (LIC) ended 8 per cent below their issue price during their stock market debut on Tuesday. The stock closed at ~873 against the initial public offering (IPO) price of ~949.

At the closing price, LIC is valued at ~5,53,722 crore (~5.54 trillion), making it the fifth-largest company in India by market capitalisation, after Infosys (~6.39 trillion) and ahead of Hindustan Unilever (~5.28 trillion).

The insurance behemoth’s shares hit an intra-day low of ~860 and a high of ~920, not coming closer to the issue price but providing small investors an opportunity to exit with nominal gains.

Retail investors, who bid for shares worth ~10,839 crore in the IPO, got the allotment at ~905. Meanwhile, LIC’S policyholders, who bid for shares worth ~10,669 crore, were allotted shares at ~889.

Shares worth nearly ~4,600 crore were traded on the first day, indicating that the bulk of the retail investors who applied in the IPO continued to remain invested.

The IPO had attracted a record 7.3 million applications. After factoring in rejections, 6.13 million applicants got an allotment, the highest for any IPO in the domestic market, and some officials said this was the highest for any IPO globally. However, most of them would be left with a sour taste because the listing belied expectations of millions of investors, many of whom are from centres traditionally not big into stock market investing.

Since LIC announced its IPO pricing late last month, the markets have gone into a tailspin, dropping as much as 8 per cent on fears of a recession.

“LIC’S listing is an important landmark. Nobody can predict the markets. We have been saying that the shares should be held not for a particular day but for longer. There is some protection to the retail investors as they get shares at a discounted rate,” said Tuhin Kanta Pandey, secretary, Department of Investment and Public Asset Management (Dipam).

“The markets were jittery and we were not expecting a big listing. But shares will pick up as we go along. A lot of investors, particularly the policyholders, who missed out in the IPO, will look to buy shares from the secondary market,” said M R Kumar, chairman, LIC.

Kaku Nakhate, president and country head, Bank of America India, said: “Despite the macro environment characterised by heightened volatility, tepid global growth, inflationary concerns, the stupendous response received by the LIC IPO is a huge testament to the incredible inherent strength of LIC’S business and an affirmation of the India growth story.”

The ~20,557-crore IPO, India’s largest ever, was subscribed just 2.95 times. Institutional investors subscribed to shares for below ~9,400 crore with foreign portfolio investors (FPIS) submitting bids worth less than ~1,800 crore.

Experts said the shares fell in the secondary market as institutional demand in the IPO was muted and as a result there wasn’t enough follow-up buying by them. A lot of small investors tend to flip their shares on listing day, which adds to the downward pressure, they said.

To align itself with the market conditions, the government had decided to lower its dilution from the proposed 5 per cent to just 3.5 per cent.

The Centre also drastically cut LIC’S valuation from earlier estimates of ~12 trillion to just ~6 trillion. At last close, LIC’S market value was ~5.54 trillion — only slightly above its embedded value of ~5.4 trillion as in September 2021.