Earlier, GreatGameIndia reported how a Black Swan event could trigger $100 billion capital outflows from India. Now, we see that India’s biggest ever IPO of LIC has incurred a loss of over $18 billion.
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 after lackluster debut at a discount on benchmark bourses, with losses reaching over 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, reports NDTV.
In fact, to put the size of the losses in perspective, the LIC IPO now stands at the top in capitalization loss since issue, commencing with the discounted listing and ongoing selling pressure. Its value has fallen by almost a third since its May 17 launch.
Despite a 30-day lock-up period that was required for anchor investors, this nonetheless happened.
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Although the purpose of the regulatory provision 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 mandatory 50 percent anchor investor lock-in period, also known as the qualified institutional buyer (QIB), came to an end. However, for 90 days following the listing date, the remaining 50% of their money will be locked-in.
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 scrip.
“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.
From its very disastrous launch on the stock exchanges, the scrip has hit a new low of ₹ 650 and a high of ₹ 920 a few days after its listing, both of which are far lower than its offer price of ₹ 949.
The market capitalisation (m-cap) of the country’s largest insurer and biggest domestic financial investor plunged to ₹ 4.2 lakh crore on Friday, with nearly ₹ 1.8 lakh crore washed away.
The company’s m-cap hovered just above ₹ 6 lakh crore at the issuance price of ₹ 949.
Increasing interest rates and worldwide inflation have dampened foreign interest in Indian stocks.
With no end in sight to the international market sell-off and India’s stock market suffering historic selling pressure from foreigners, LIC stocks are in for more agony.