In a recent market development, Life Insurance Corporation of India (LIC) surpassed State Bank of India to become the most valuable state-run company in terms of market capitalization. However, this achievement is overshadowed by the fact that LIC has been a wealth destroyer for investors, with its stock failing to meet expectations since its listing.
As of Wednesday’s trading, LIC’s market capitalization stood at ₹5.66 lakh crore, outpacing SBI’s ₹5.64 lakh crore. Although SBI briefly reclaimed the top spot, LIC’s market cap milestone does not align with the stock’s performance. LIC’s stock listed at a discount in May 2022 and only managed to cross that level on Tuesday, almost two years after listing.
Currently trading below the retail share allotment price of ₹904 and the original IPO price of ₹949, LIC shares have struggled to deliver significant returns to investors. Over the last 12 months, the stock has gained a modest 27%, lagging behind other PSE index constituents such as REC, PFC, BHEL, and HAL, which have posted gains ranging from 140% to 250%.
Interestingly, LIC’s shares rank as the second-worst performers on the Nifty PSE index over the same period, surpassing only Container Corporation of India, which is up 25%.
Despite becoming India’s largest IPO, raising over ₹21,000 crore with a 3.5% stake sale, LIC’s stock has failed to resonate positively with investors. The government still holds the remaining 96.5% stake, and discussions about an LIC Follow-On Public Offer (FPO) have not materialized, according to DIPAM Secretary Tuhin Kanta Pandey.
A notable exemption granted to LIC is its waiver from complying with minimum public shareholding norms, allowing it until May 2032, instead of the usual three years, to achieve the 25% minimum public shareholding.
Although LIC shares have recovered from their 52-week low of ₹530, the recent rally has not been sufficient to reassure investors. Currently trading at 0.85 times price-to-embedded value, LIC shares are down 0.6% at ₹887.2, with a modest 11% gain over the last month.
