LIC IPO turns out to be another flop show as valuation falls below Rs 5 lakh crore

NEW DELHI: LIC’s IPO, which was supposed to be India’s Aramco (Saudi’s oil giant) moment, is turning out to be another flop show.  Shares of the state-owned insurer fell another 3% to close at Rs 777.40 apiece and its market capitalisation came down to Rs 4,91,705 crore (Monday’s closing) against a m-cap of Rs 6,00,242 crore based on the upper end of its IPO price.

LIC’s valuation falling below Rs 5 lakh crore-mark is a significant event, given the government, its sole stakeholder then was first considering listing the company at a valuation of Rs 12 lakh crore. In February, the government filed papers with the Securities and Exchange Board of India (SEBI) for IPO approval to sell nearly 5% of its stake in LIC. The IPO’s size at that time was pegged at Rs 60,000 crore, while LIC’s valuation was pegged at Rs 12 lakh crore.

This valuation received backlash from domestic as well as foreign portfolio investors, with many calling it very expensive, especially in the backdrop of the Russia-Ukraine war and tightening monetary policy by the US Fed and India’s RBI to control inflation. The government then filed fresh papers with Sebi to sell its 3.5% stake in the firm to raise Rs 21,000 crore.

Deepak Jasani, head of retail research, HDFC Securities, said the latest quarterly results didn’t excite investors (especially institutional) to buy the stock and the fact that the determination of embedded value of LIC late was not taken well by the investors. Currently, LIC’s embedded value is estimated at Rs 5.4 lakh crore. 

He added that retail and HNI investors could be selling the stock after getting tired of waiting over 2 weeks post listing. VK Vijayakumar, chief investment strategist at Geojit Financial Services, said besides the poor Q4FY2022 show, the negative market sentiments and the lacklustre performance of financial services sector also has contributed to the fall of the stock.