Why did the LIC, India’s largest IPO, list at an 8% discount? — Quartz India


India had pulled all stops to make the initial public offer (IPO) of the state-run giant Life Insurance Corporation of India (LIC) a success. Nothing seems to have worked.

The company made a tepid debut on BSE today (May 17) at 867.2 rupees ($11.2), a discount of 8.62% on its issue price of Rs949. On the National Stock Exchange, it got listed at a discount of 8.11%.

The stock price rose to Rs918 apiece in early trade but was still below the issue price.

Even though the government raised Rs20,557 crore by selling a 3.5% stake in the insurer, making it the largest IPO ever, the task of taking LIC public was no cakewalk. Earlier this month, the IPO opened for subscription for five days, including the weekend, after careful deliberations in the wake of the Ukraine war.

It was subscribed by nearly three times, predominantly by retail and institutional buyers. The participation from foreign investors was muted.

Any investor who was allotted shares is indirectly exposed to the ongoing volatility in the Indian equities, according to Macquarie Group. The war, along with the prospects of aggressive tightening of monetary conditions by the US Federal Reserve, has stirred risk aversion globally.

“The company’s weak listing can be attributed to high volatility in the markets and negative market sentiments,” Parth Nyati, the founder of the online stock trading platform Tradingo. Investors must stick on for the long term given LIC’s competitive advantage within the industry, he told Mint newspaper.



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