India’s LIC Falls on Trading Debut After Landmark IPO

India’s largest life insurer has stumbled on its trading debut after relying on small investors to help it achieve a record $2.7 billion IPO despite market turmoil. Global.

India’s state-owned Life Insurance Group’s disappointing first-day performance comes even after New Delhi slashed the size and pricing of its share sale in response to a volatile market. motion.

The shrinking deal, in which the government sells a 3.5% stake, remains India’s largest-ever initial public offering. According to Dealogic data, it is also the third largest company in the world this year, in the context of companies listed on international markets are slowing down.

LIC closed at 874.45 Indian rupees per share on Tuesday, or $11.25, down despite the broader market recovery. The closing price was 7.8% lower than the IPO price of 949 rupees.

While general investors have ordered nearly three times as many shares on offer, demand has been strongest from individuals, who are offered great incentives to participate. LIC provided employees and other individual investors with a 4.7% discount from the asking price and a 6.3% discount for policyholders.

Demand from foreign investors, who were big buyers during last year’s IPO boom, has stalled. They auctioned only 61% of the total shares for institutional buyers.

Foreigners have been net sellers of Indian stocks every month since October, raking in more than $25 billion through Tuesday, amid uncertainties caused by Russia’s invasion of Ukraine, rising inflation and higher interest rates globally. Rising oil prices are pushing up India’s import bill and putting pressure on the rupee.

India’s leading S&P BSE Sensex index rose 2.5% on Tuesday. According to FactSet, it is down about 6.8% this year, a more enduring performance than many other major indexes.

Earlier this month, India’s central bank abruptly raised its benchmark interest rate by 0.4 percentage points, citing inflationary pressures and risks facing emerging markets as rich countries pull back. easy money policy. India’s consumer price index rose 7.8% in April from a year earlier, well above the central bank’s 2% to 6% target range.

The previous record holder for India’s largest IPO also has a worse track record in the mass market. Share in One97 Communications Ltd.

, the parent company of financial-technology platform Paytm, fell 27% in its first trading day last November. On Tuesday, One97 stock closed nearly 73% below the issue price.

With a market value of around 5.5 trillion rupees, or $71 billion, LIC is now the fifth most valuable company listed on an exchange run by BSE Ltd. operated by Mumbai, according to BSE data.

Some investors have high hopes for the listing of shares of LIC, as it is a household name in India, with about 280 million policies.

In recent months, brokers such as Chandra Bhan Singh, head of Geojit Financial Services’ branch in Bareilly, northern India, have persuaded LIC policyholders to become shareholders. Many of them have never invested in stocks. On Tuesday, Mr. Singh said he received calls from several LIC stock owners asking what to do now that the stock was falling.

“We tell them if you can buy, buy more,” he said. Like many fund managers and brokers in India, Mr. Singh attributed the decline in LIC’s share price to weaker global markets and he believes the stock has value.

Some analysts said Tuesday’s selling was partly driven by smaller investors, including regular individuals and the richer, who bought LIC stock in the hope of selling. it’s fast with profit. After the stock became untradeable at launch, these holders got out to limit their losses.

“They got nothing,” said Atul Sharedalal, director of Pravin Ratilal Share and Stock Brokers Ltd., in Ahmedabad. But he said he expects the stock to recover. “Let’s see a month or two later,” he said.

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Edmund DeMarche

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