India’s largest IPO has lost $17 billion since its debut a month ago

The Indian government has realised that it disastrously timed the listing of the country’s largest insurer Life Insurance Corporation (LIC) of India. Since its debut on May 17, the stock price has plummeted nearly 30%. The recent rout in equities has led to a wipeout of $17 billion (1.32 lakh crore rupees) in the company’s market value.

Among newly listed companies in Asia this year, LIC ranks second to lose market value, according to Bloomberg.

“You buy a stock because you feel for the next many years there will be growth, the stock would double and triple and quadruple. I do not see that happening. It is a completely matured business, there is nothing in LIC, no reason to buy it or hold it,” Rajat Sharma, founder of Sana Securities told The Economic Times newspaper.

Why are shares of LIC falling?

LIC’s $2.7-billion-IPO has been a flop because central banks globally began raising interest rates to fight inflation pressures. This curbed the demand for stocks, dragging down India’s benchmark indices by about 10% this year.

Even the anchor investors, who had collectively bought nearly 59.3 million shares a day, shed their LIC holdings.

Anchor investors are institutional investors who are allotted shares just before an IPO opens for subscription. Higher investment by anchor investors increases a retail investor’s confidence in the demand for the shares. On June 13, falling for the tenth consecutive session, the share dropped by up to 5.6%.

The LIC listing was crucial to plug the government’s budget deficit after the expenditure swelled during the pandemic. A deeply concerned department of investment and public asset management of the Indian government has said it will look into the debacle.

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