Iosr Journal Of Economics And Finance (Iosr-Jef)

E-Issn: 2321-5933, P-Issn: 2321-5925.Volume 15, Issue 5 Ser. 6 (Sept. – Oct. 2024), Pp 11-14
www.Iosrjournals.Org

"Evolving Horizons: The Journey And Impact Of LIC's

Landmark IPO"
Dr Shalini Kumar, Prof. M. Vij
Core Faculty, President & Academic Council Chair, GRMI

Abstract
The Initial Public Offering (IPO) of the Life Insurance Corporation of India (LIC) in May 2022 marked a pivotal
transition for one of India’s largest financial institutions from a state-owned entity to a publicly listed company.
This move was part of the government's broader strategy to divest its stakes in public sector enterprises, aiming
to enhance operational efficiencies, improve transparency, and maximise shareholder value. Navigating through
a series of legislative amendments and complex valuation challenges, the IPO drew substantial attention from
both domestic and international investors, reflecting strong confidence in LIC's market fundamentals.
This paper provides a detailed review of the IPO process, the subsequent market response, and its impact on
LIC’s business operations and governance structure. It discusses the strategic motivations behind the IPO, the
execution challenges, and the implications for future economic reforms in India. By analysing LIC’s performance
post-IPO, the study highlights the critical role such transformative events play in modernising state-owned
enterprises and integrating them with global financial markets, projecting significant implications for similar
entities considering public offerings.
Keywords: life Insurance Corporation of India (LIC), Initial Public Offering (IPO) Financial Markets
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Date of Submission: 02-10-2024 Date of Acceptance: 12-10-2024
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I. Introduction
The Life Insurance Corporation of India (LIC) is a state-owned insurance and investment corporation,
which has played a pivotal role in India's financial services sector since its establishment in 1956. LIC's journey
toward its Initial Public Offering (IPO) represents a significant milestone in the Indian financial market,
illustrating the transition of one of the country's oldest and largest financial institutions into a publicly traded
entity. This move was not only aimed at aligning LIC with global practices but also at unlocking value for the
government and the corporation itself.

LIC's IPO Journey

The IPO of the Life Insurance Corporation of India (LIC) was a key part of the Indian government's plan
to sell off parts of state-owned businesses. It aimed to raise substantial capital given LIC's size. To prepare, the
government amended laws to allow LIC to restructure and go public, with efforts made to reassess finances, value
the company, and get the necessary approvals. Valuing LIC was complex due to its large assets and varied
investments, crucial for setting the IPO price to attract investors while meeting government goals. The IPO drew
widespread interest, despite concerns about its high valuation. Upon listing, LIC's performance sparked debate
but was seen as a success in widening its investor base and improving transparency and governance. The IPO is
expected to drive LIC towards better efficiency and customer focus, signalling growth and innovation ahead.
Table1 captures the essence of each phase in LIC's IPO journey, from the initial background and
significance through to the impact and prospects following the IPO. Table 2 presents the LIC’s IPO timeline.

Table 1: LIC’s IPO journey

Aspect Details
Background and Part of the government's agenda to privatize and divest stakes in state-owned enterprises. A crucial step
Significance due to LIC's size and potential capital.
Legislative changes to facilitate listing, including amendments to the LIC Act. Extensive preparations
Preparatory Steps
like financial restatements and regulatory approvals.
Complex process due to LIC's large assets and diverse investments. Crucial for balancing investor
Valuation and Pricing
interest with government objectives.
Market Response and Drew significant attention despite market volatility. High subscription levels indicated strong
Subscription confidence in LIC's fundamentals.

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 "Evolving Horizons: The Journey And Impact Of LIC's Landmark IPO"

Aspect Details
Landmark event in Indian capital markets. Post-listing performance sparked debates but was seen as
Listing and Performance
successful for broadening shareholder base and enhancing governance.
Impact and Future Significant implications for LIC, including operational efficiency and customer service. Expected to
Prospects drive future growth and innovation.
Source: Authors compilation

LIC's IPO journey is a testament to the evolving landscape of India's financial services sector and reflects
broader economic reforms. The success of this IPO is seen not just in financial terms but as a significant step
towards enhancing transparency, governance, and efficiency in one of India's key state-owned enterprises.

Table 2: LIC’s IPO timeline

LIC IPO Timeline (Tentative Schedule)
LIC IPO opens on May 4, 2022, and closes on May 9, 2022.
IPO Open Date Wednesday, May 4, 2022
IPO Close Date Monday, May 9, 2022
Basis of Allotment Thursday, May 12, 2022
Initiation of Refunds Friday, May 13, 2022
Credit of Shares to Demat Monday, May 16, 2022
Listing Date Tuesday, May 17, 2022
Cut-off time for UPI mandate confirmation 5 PM on May 9, 2022
Source: Authors compilation

The LIC IPO stood out as the largest in India's stock market history at the time of its launch, marking a
significant milestone. It was a key component of the government's divestment strategy, involving the sale of a
portion of its stake in the Life Insurance Corporation of India (LIC). This move not only demonstrated the
government's dedication to its disinvestment plans but also necessitated a series of regulatory and legislative
adjustments to facilitate the process. The IPO garnered substantial attention from both domestic and international
investors, underscoring the strong brand value and trust that LIC commands among the public. This massive
investor interest highlighted the widespread recognition of LIC's stature and reliability in the market.
Table 3 encapsulates the share distribution across different categories of investors for the IPO.

Table 3: Share distribution of LIC’s IPO across different categories

Investor Category Shares Offered Percentage of Total Maximum Allottees
Anchor Investor Shares Offered 59,296,853 26.79% NA
QIB Shares Offered 39,531,236 17.86% NA
NII (HNI) Shares Offered 29,648,427 13.39% -
Retail Shares Offered 69,179,663 31.25% 4,611,977
Employee Shares Offered 1,581,249 0.71% NA
Total Shares Offered 221,374,920 100% -
Source: https://www.tickertape.in/stocks/life-insurance-corporation-of-india-LIC

Pricing and Performance of LIC’s IPO

The stock experienced significant volatility during the observed period, with notable fluctuations in price
and trading volume. This volatility reflects changes in investor sentiment, market conditions, and possibly the
company's operational performance. Table 4 outlines the monthly movement in share price for LIC over a span
from June 2022 to April 2024

Periods of decline
The most significant drop occurred from June 2022 to July 2022, when the share price fell from ₹673.9
to ₹677.8, despite the closing prices suggesting a mild increase, the opening prices and the percentage change
highlight a substantial period of decline in the months leading up to this.
Between February 2024 and March 2024, the share price saw a sharp decline from ₹1,022.80 to ₹916.15,
which was one of the steepest monthly decreases in percentage terms (-10.43%). This could be attributed to
market corrections, negative news, or disappointing financial results.

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 "Evolving Horizons: The Journey And Impact Of LIC's Landmark IPO"

Table 4: Monthly movement in share prices

Year Month Price Open High Low Volume Chg%
Apr-24 992.75 926.65 1,016.00 926.65 2.43M 8.36%
Mar-24 916.15 1,027.20 1,049.00 865 70.92M -10.43%
2024
Feb-24 1,022.80 956.9 1,175.00 926 161.07M 7.69%
Jan-24 949.75 831.5 971.9 819.3 103.70M 14.08%
Dec-23 832.5 685 843.9 667.15 117.49M 22.52%
Nov-23 679.5 603.85 699 598.25 46.87M 12.83%
Oct-23 602.25 648.1 651.85 597.35 15.32M -7.31%
Sep-23 649.75 645.3 691 643.05 27.33M 0.69%
Aug-23 645.3 644 679 634 27.83M 0.84%
Jul-23 639.95 635 642.9 614.25 16.85M 1.22%
2023
Jun-23 632.25 595 654 593.95 25.55M 6.23%
May-23 595.15 552 615.5 549.1 34.24M 8.23%
Apr-23 549.9 540 556.4 537.6 13.94M 2.91%
Mar-23 534.35 581.3 625 530.05 26.56M -7.62%
Feb-23 578.4 660 665.4 566 35.96M -11.46%
Jan-23 653.3 685 746 639.2 33.94M -4.57%
Dec-22 684.6 638 754.25 638 70.08M 7.59%
Nov-22 636.3 608.95 684.9 603.1 30.69M 5.36%
Oct-22 603.95 622 635.8 588 16.98M -2.85%
2022 Sep-22 621.65 673 678 617 31.52M -7.70%
Aug-22 673.5 680 706.6 667.2 27.53M -0.63%
Jul-22 677.8 675 724.4 669 28.46M 0.58%
Jun-22 673.9 811.4 817.45 650 75.46M -16.94%
Source: https://www.tickertape.in/stocks/life-insurance-corporation-of-india-LIC

Significant Growth Phases

From November 2023 to April 2024, the stock showed a strong upward trajectory, starting from ₹679.5
in November 2023 and peaking at ₹992.75 by April 2024. This growth phase indicates a period of positive investor
sentiment and potentially favourable company developments or market conditions. Once again, from July 2023
to December 2023, there was another notable growth phase, with the price moving from ₹639.95 to ₹832.5,
marking a substantial increase. This period likely reflects improving fundamentals or market perception of the
stock. The trading volume varied significantly throughout the period, with peaks often corresponding to periods
of significant price movement. For instance, February 2024 saw a high trading volume of 161.07M alongside a
substantial price increase, indicating strong buying interest

Recovery and Corrections

The stock's journey from June 2022 to April 2024 illustrates a series of recoveries and corrections. The
initial decline from the highs of June 2022 was followed by a recovery phase starting in November 2022, with
the stock then entering a period of volatility with alternating gains and losses before experiencing substantial
growth towards the end of the observed period
The fluctuations in the stock's price and volume indicate varying investor confidence influenced by
external factors (such as market conditions and economic indicators), the company's performance, and possibly
news or events directly related to the company or its industry. The periods of growth may align with positive
developments within the company, such as strong earnings reports or successful initiatives, while the declines
could reflect broader market downturns, less favourable company news, or profit-taking after the stock's price
increases.
In summary, the movement in share price from June 2022 to April 2024 highlights the dynamic nature
of the stock market, where a combination of company performance, investor sentiment, and external factors can
lead to significant fluctuations in a stock's price and trading volume

II. Conclusion And Future Prospects

LIC’s IPO was the biggest public issue in India. It has been nearly two years since the LIC shares were
listed on the domestic stock exchange after the completion of its Rs 21,000 crore net worth. However, the listing
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 "Evolving Horizons: The Journey And Impact Of LIC's Landmark IPO"

of India’s largest IPO has received mixed results. In the first year the LIC’s shares fell around 35% from the
listing price and 40% from the upper band price of the IPO price. The performance in the second year improved
substantially with the stock bouncing back and soaring to unprecedented heights in January and February this
year. LIC turned attractive due to factors that included strong sentiments towards public sector stocks, a marginal
increase in dividends and an expected buoyancy in the equity market by the investors. This helped to increase the
confidence of the investors who have steadfastly held on to their investments. The marginal decrease observed in
its stock price this year was the announcement to raise wages by around 17% for its 1.10 lakh employees. LIC
now commands a higher market capitalisation than other major giant companies.
With LIC showing a decent financial performance this year along with bullish sentiments towards public
sector stocks and prospects of a higher dividend pay-out have all combined to ensure that the prospects towards
LIC’s shares remain positive in the coming years. LIC is a fundamentally strong Company and has the capability
and capital to compete with any company in the market.

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