Indian insurance giant slumps after country's biggest-ever IPO

India's biggest-ever IPO, state-owned insurance giant LIC, fell seven percent from its flotation price of 949 rupees when it made its market debut Tuesday

India's biggest-ever IPO, state-owned insurance giant LIC, fell seven percent from its flotation price of 949 rupees when it made its market debut Tuesday. AFP/Indranil Mukherjee

MUMBAI - Indian state-owned insurance giant LIC slumped on its market debut following the country's biggest-ever initial public offering, closing nearly eight percent below the IPO price.

Prime Minister Narendra Modi's government raised $2.7-billion by selling 3.5 percent 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 five percent 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 percent 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.

"I knew it won't be a great listing but it doesn't matter to me," said 30-year-old Ayush, a recent market entrant, who was unbowed by the decrease in share price.  

"I bought the shares for the long-term."

Global equities have been tumultuous for most of 2022. Foreign investors have withdrawn a net 1.71 trillion rupees ($22-billion) from Indian markets so far this year, stock exchange data showed, as US monetary policy tightening further roiled sentiment.

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 percent 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.

The firm warned in its regulatory filing that "there can be no assurance that our corporation will not lose further market share" to private companies.

Source
AFP

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