“LIC 2.0” Flop Wipes Out Over $18 Billion In IPO Wealth; Will There Be More Pain?

The Life Insurance Corporation (LIC), India’s largest-ever initial public offering (IPO), which was hailed as the “LIC 2.0” phase of the nation’s insurance behemoth, has faltered since tepidly listing at a discount on benchmark bourses, with losses reaching roughly a third in valuation.

After suffering a nearly $18 billion market value wipeout, LIC’s stock dropped on Friday to 661.70, down 3.2% for the day and over 30% below its issue price of 949 per share. This made it one of the top wealth destroyers among IPOs this year.

In fact, to put the size of the losses in perspective, the LIC IPO now ranks at the top in capitalization loss since issue, commencing with the discounted offering and ongoing selling pressure. Its value has fallen by almost a third since its May 17 debut.

Despite a 30-day lock-up period that was required for anchor investors, this nonetheless happened.

Although the purpose of the regulatory requirement was to prevent anchor investors from selling shares as soon as they were listed, the bleeding of LIC shares has not halted.

On June 10, the required 50 percent anchor investor lock-in period, also known as the qualified institutional buyer (QIB) lock-in period, came to an end. However, for 90 days following the listing date, the remaining 50% of their money will be restricted.

The management of the insurer would look into these issues and increase shareholders’ value, according to the government, which had stated that it is “concerned” about the brief dip in LIC’s stock price.

“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.

However, the underwhelming earnings results and a lack of communication from the company’s management regarding its growth strategy and plans have not benefited the nation’s largest insurer.

The stock has reached fresh lows of 650 and 920 after its disastrous debut on the stock markets, both of which are far lower than its offer price of 949.

The market capitalization (m-cap) of the largest domestic financial investor and insurer in the nation dropped to 4.2 lakh crore on Friday after losing more than 1.8 lakh crore.

The company’s market capitalization (m-cap) was just over 6 lakh crore at the issuance price of 949.

Foreign demand for Indian equities has been hampered by rising interest rates and global inflation.

More suffering for LIC shares is in store as long as the sell-off on international markets continues unabated and there is no sign of it slowing down anytime soon.