Indian state-owned insurance giant LIC slumped on its market debut Tuesday following the country's biggest-ever initial public offering, opening 7% below the offer price.
Prime Minister Narendra Modi's government raised $2.7 billion by selling 3.5% of Life Insurance Corporation of India as his administration seeks to privatize state assets to plug a gaping budget deficit.
But it was forced to cut back the offer from a planned 5% after markets turned volatile following Russia's invasion of Ukraine and China's COVID-19 lockdowns.
The offer price of 949 rupees ($12.22) per share had valued LIC at $77 billion, but it opened Tuesday on Mumbai's exchange trading 7% lower. The share price dropped to 9.4% down, before recovering slightly.
The muted debut could test the appetite of new shareholders for further flotations of nationalized companies as Modi seeks to sell off state assets to plug an estimated 16.6 trillion rupees fiscal deficit.
The IPO saw enthusiastic participation from small investors and was oversubscribed nearly three times during the six-day application period.
But foreign investors have withdrawn a net 1.71 trillion rupees from Indian equities so far this year, stock exchange data showed, as the U.S. monetary policy tightening further roiled sentiment.
Founded in 1956 by nationalizing and combining more than 240 firms, LIC was for decades synonymous with life insurance in post-independence India until the entry of private companies in 2000.
It continues to lead the pack with a 61% share of the market in India, with its army of 1.3 million "LIC agents" giving it a huge reach, particularly in remote rural areas.
But LIC's market share has declined steadily in the face of competition from net-savvy private insurers offering specialized products.
The firm warned in its regulatory filing that "there can be no assurance that our corporation will not lose further market share" to private companies.
The IPO followed a yearslong effort by bankers and bureaucrats to appraise the mammoth insurer and prepare it for listing.
LIC is also India's largest asset manager, with 39.55 trillion rupees under management as of Sept. 30, including significant stakes in Indian blue chips such as Reliance and Infosys.
LIC's real estate assets include vast offices in prime urban Indian locations, including a 15-story office in Chennai that was once the country's tallest building.
The firm is also believed to own a large collection of rare and valuable artwork that includes paintings by MF Husain – known as the Pablo Picasso of India – although the value of these holdings has not been made public.
