LIC launches IPO today: fear of negative listing persists

Life Insurance Corporation of India (LIC), the country's largest insurer, will list its shares on the stock exchanges on May 17. But many analysts have suggested flat to negative listing due to volatility in the global equity markets. The grey market premium of LIC is currently in the negative territory, trading at a discount of nearly Rs 30 a share.

In the last 10 years, initial public offerings (IPOs) of big state-run firms have not created any blockbusters as such and mostly traded below their respective offer price.

Analysts say PSU stocks by definition are listed due to divestment, and their objective of social good over wealth creation impacts the perception of investors, and in turn valuation matrix. Hence, it does not come as a surprise that PSU IPOs have historically remained lacklustre and have not turned into blockbusters.

India's biggest PSU IPO was Coal India Ltd, which was listed in November 2010 with an issue price of Rs 245 a share. It currently trades over 42 percent lower than its issue price. The firm raised over Rs 15,000 crore through the IPO.

The second largest PSU IPO was General Insurance Corp which listed in October 2017. The firm raised over Rs 11,000 crore through the share sale. Currently, it trades nearly 73 percent lower than its issue price.

New India Assurance and NHPC Ltd ranked third and fourth and both were listed in November 2017 and September 2009 respectively. Both are currently trading below their offer price. In the case of NHPC, the interesting part is that it never crossed its IPO issue price since listing. The table below suggests how big IPOs of PSUs performed since listing in the last 10 years.