“LIC 2.0” Flop Wipes Over $18 Billion Of IPO Wealth; More Pain Ahead?

India’s biggest-ever initial public offering (IPO) of Life Insurance Corporation (LIC), which was touted as the next phase of the country’s insurance behemoth, “LIC 2.0”, has flopped since tepid listing at a discount on benchmark bourses, with losses worth nearly a third in valuation.

LIC’s stock fell on Friday to Rs 661.70, down 3.2 per cent for the day, and over 30 per cent lower from its issue price of Rs 949 per share, turning it into one of the top destructors of wealth among IPOs this year after experiencing a near $18 billion market value wipeout.

Indeed, to put the magnitude of losses in context, having plunged nearly a third in value since its May 17 debut, LIC IPO now ranks at the top in capitalisation loss since issue, starting with the discounted listing and continuous selling pressure.

That despite a mandatory lock-up period for anchor investors for the first 30 days.

While that regulatory rule was to stop anchor investors from offloading shares immediately after listing, it has not stopped the bleeding in LIC shares.

The mandatory lock-in period for 50 per cent of investments from anchor investors, or the qualified institutional buyer (QIB), ended on June 10. Still, the remaining 50 per cent of their money will be locked-in for 90 days from the listing date.

The government had said it is “concerned” about the temporary blip in LIC’s scrip and that the insurer’s management will look into these aspects and raise shareholders’ value.

“We are very concerned about the temporary blip in LIC share price. People will take time to understand (the fundamentals of) LIC. LIC management will look into all these aspects and raise the shareholders’ value,” DIPAM secretary Tuhin Kanta Pandey had said earlier this month.

But what has not helped the country’s insurance giant is the disappointing earnings results and a lack of communication from the firm’s management on its growth strategy and plans.

Since its flop debut on the stock exchanges, the scrip has touched a new low of Rs 650 and a high of Rs 920 a few days after its listing, which is well below its offer price of Rs 949.

The country’s biggest insurer and the largest domestic financial investor’s market capitalisation (m-cap) fell to Rs 4.2 lakh crore on Friday, with over Rs 1.8 lakh crore wiped out.

At the issue price of Rs 949, the company’s m-cap stood slightly over Rs 6 lakh crore.

Rising interest rates and global inflation have hurt foreign demand for Indian shares.

With no let-up from global markets sell-off expected anytime soon and India’s stock market facing unprecedented selling pressure by foreigners, more pain is in store for LIC shares.