India’s biggest-ever IPO falls on debut
Indian state-owned insurance giant LIC slumped on its market debut yesterday following the country’s biggest-ever initial public offering, closing nearly 8% below the IPO price.
Prime Minister Narendra Modi’s government raised $2.7 billion by selling 3.5% of Life Insurance Corporation of India as his administration seeks to sell off state assets to bolster tattered public finances.
But it was forced to cut back the offer from a planned 5% after markets turned volatile following Russia’s invasion of Ukraine and China’s Covid lockdowns.
The offer price of 949 rupees ($12.22) had valued LIC at $77 billion, but the stock traded under pressure all day, closing 7.75% lower at 875.45 rupees a share.
The muted debut could test market appetite as Modi seeks to privatise more shares in nationalised companies to plug an estimated 16.6 trillion rupee ($214 billion) fiscal deficit.
Market analyst Arun Kejriwal said the slump on LIC’s first day of trading was a “learning” experience, adding that the government “will have to do more to convince investors if it wants to sell more of its stake.’’
But the IPO saw enthusiastic participation from small investors — including many first-timers — and was oversubscribed nearly three times.
India was heavily regulated for decades after independence, and the state still retains an outsize role in the economy.
Hundreds of companies are owned by national or lower-level governments, operating in fields ranging from mining and resources to electricity and construction.
Modi has pledged to “monetise and modernise” the sometimes moribund sector, and the insurance giant’s IPO followed a years-long effort by bankers and bureaucrats to appraise the mammoth firm and prepare it for listing.
Founded in 1956 by nationalising and combining more than 240 firms, LIC was a monopoly until private companies were allowed to enter the market in 2000.
It continues to lead the pack with a 61% market share and an army of 1.3 million “LIC agents” giving it huge reach, particularly in remote rural areas.
But its dominance has declined steadily in the face of competition from net-savvy private insurers offering specialised products.
LIC warned in its regulatory filing that “there can be no assurance that our corporation will not lose further market share” to private companies.
In a country where only 3% of the 1.4 billion population has life insurance, analyst Kejriwal said LIC’s potential remained “enormous”.
Going public will also force more transparency on the insurance behemoth.