With a $17 billion loss, the LIC IPO is a Massive Wealth Destroyer

LIC is one of the largest wealth destroyers among Asia’s initial public offerings this year, with a market value wipeout of $17 billion.

Markets

By Aryan Jakhar On Jun 13, 2022

Image Source: The Financial Express

Life Insurance Corp of India is one of the largest wealth destroyers among Asia’s initial public offerings this year, with a market value wipeout of $17 billion.

According to data provided by Bloomberg, India’s largest ever IPO has dropped 29 percent since its May 17 debut, ranking second in terms of market capitalization loss since listing. It is now second only to LG Energy Solution Ltd. of South Korea, which suffered a more than 30% peak-to-trough collapse in its share price after an early jump on debut.

LIC’s $2.7 billion initial public offering (IPO) has turned out to be one of Asia’s greatest new stock disasters this year, as rising interest rates and inflation levels globally reduced demand for share sales, and India’s stock market has been hit by unprecedented foreign selling pressure. This year, the S&P BSE Sensex has lost more than 9% of its value.

After a mandated lock-up period for anchor investors ended Friday, LIC’s shares are projected to tumble for the tenth consecutive session, sliding as high as 5.6 percent Monday. The rout has concerned India’s government, with officials stating that the company’s management will “look at all of these areas and will increase shareholder value.”

The long-awaited LIC IPO was nicknamed India’s “Aramco moment” in reference to the world’s largest IPO, Saudi Arabian Oil Co., which raised $29.4 billion in 2019. Prime Minister Narendra Modi’s ambitions to expand the country’s capital markets included it. The share offer, which was nearly three times oversubscribed, was intended to help the government reduce its budget deficit after expenditure rose during the pandemic.

According to Avinash Gorakshakar, head of research at bargain brokerage Profitmart Securities Pvt, the stock could face more pain as a result of its poor quarterly performance. “The management’s communication with investors is confusing. They haven’t held an analyst call after the results,” he said. “So there is no clarity on how the company is planning to grow, what is going to be its strategy.”