One year down, India’s biggest IPO and share is a mega flop

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On May 17th, 2022, India’s biggest insurance player, the Life Insurance Corporation of India, listed on the stock exchange. With each share priced at Rs 949, the issue was 3x oversubscribed. It made sense, for LIC, which was valued at Rs 5 lakh crore, takes up about 70% of India’s life insurance segment. It even managed to mop up Rs 21,000 crores on its debut.

But one year down, LICs stock has taken a serious beating, trading at Rs 567.78. Down nearly 40% from its original price, reports suggest that it has wiped off more than Rs 2 lakh crore worth of investor money.

In fact, the only listed entities that have eroded more value from the market than LIC are the Adani Group companies. And while LIC’s reported equity investments in Adani amounting to less than 0.1% of their total assets, Adani group owes around Rs 6,183 crores to LIC as of March, 2023, per a written Lok Sabha response given by FinMin Nirmala Seetharaman

Political slugfest

The Adani-LIC nexus became a point of contention between Amit Malviya, who heads BJPs IT cell and Congress MP Jairam Ramesh. Ramesh alleged that Modani (colloquial for Modi and Adani) were the main reason behind LICs southward trajectory. Countering this, Malviya tweeted that the MP was peddling misinformation, since LIC, which has less than 1% exposure to Adani Group, has managed to rake in profits worth crores from it.

Sonesh Dedhia, who heads IFANOW, a personal finance centric social network, also notes this to be a major reason for LICs lacklustre performance. “LIC has always been a scapegoat when it comes to investing for companies in doldrums based on governments directive”, he says.

“Ideally the performance should have been good considering the earnings. But due to exposure in Adani group, the stock market could have harboured negative sentiments for it, leading to poor performance”, he continues.

Table 1 : Brokerage Houses on LIC

Brokerage Houses         Rating           Target (In Rs)

ICICI Securities              Buy             917

Motilal Oswal                    Buy               830

BoB Capital                      Buy            800

Geojit BNP Paribas      Buy                765

Emkay Global           Hold                 700

Source : Respective brokerage houses

On the financial end too, LIC hasn’t fared well. While it is scheduled to declare its quarterly results on May 24th, the company did register a consolidated net profit of Rs 8,334 crores in the last quarter (December 2022). At the same time, it also witnessed a 14% Y-O-Y uptick in its net premium income.

But, new business performance, an indicator of how well a business is doing currently, has been dismal for LIC. While private insurers registered a 8.55% hike in their income from premiums, LIC alone saw its premium income decline by a steep 50%. Overall, the life insurance industry saw its premium income fall by 30%.

The biggest perpetrator in LIC’s premium income downfall was the 66% drop in its premium income from group single premium policies. Notably, such plans require a one-time, lump sum payment to get life insurance cover for the entire term. In the same category, private insurers showed a 14.97% increment.