The Life Insurance Corporation of India logo outside the company's office in New Delhi. Photo: AFP / Nasir Kachroo / NurPhoto

India’s largest insurer, which recently executed the country’s biggest initial share sale, had a lackluster debut on stock markets.

Shares of Life Insurance Corporation of India were sold at an 8% discount against the issue price of 949 rupees on Tuesday, even though the Bombay Stock Exchange index Sensex and National Stock Exchange’s Nifty index had a decent opening and ended the day on a high note.

The insurer’s scrip was listed at a discount in both the exchanges and throughout trading hours it remained below the issue price. It closed on the National Stock Exchange at 873 rupees a share, and on the Bombay Stock Exchange, it concluded the day at 875.45 rupees a share.

The listing price was even below the discounted price at which shares were allotted to policyholders, employees and retail investors. Employees and policyholders were given a discount of 60 rupees and 45 rupees per share respectively.

More than 48.7 million shares changed hands on the National Stock Exchange, while on the Bombay Stock Exchange, it was over 2.75 million.

However, despite an under-par listing, Life Insurance Corporation joined the list of top-5 most valued companies with a market capitalization of nearly 5.54 trillion rupees, behind Reliance Industries, Tata Consultancy Services, HDFC Bank and Infosys.

The government and insurance officials, however, put on a brave face. Tuhin Kanta Pandey, Secretary of the Department of Investment and Public Asset Management, which manages the divestment of state-owned assets, said the weak debut was due to unpredictable market conditions and suggested investors hold on to the stock for long-term value.

Life Insurance Corporation Chairman M R Kumar said: “It (stock price) will pick up as we go along. I am sure a lot of people, especially the policyholders who have missed out on the allotment, will pick up the shares (in the secondary market). I don’t see any reason why it should be tepid for too long.”

Market experts too suggested that investors hold on to the shares and the scrip will see an uptick in the long term. They felt once the headwinds caused by the Russia-Ukraine war and the worries on the inflation front subside, investor interest will revive for insurance and banking sector stocks.

Earlier, the initial share sale of Life Insurance Corporation had decent traction, with the scrip being oversubscribed three times. The government raised $2.7 billion through this sale. It generated interest among the millions of families nationwide who hold Life Insurance Corporation policies, as they could buy shares at a discount.

However, critics point out that the stock price could drop even more because of little growth prospects for the legacy business. Until 2000, the state-owned insurer had enjoyed a monopoly status in the insurance sector and it continues to be the largest player.

However, private players such as HDFC Life and others have managed to woo top-end customers and the state-owned behemoth’s position in this segment is weakening.

They also cite the earlier examples of the market listing of state-owned firms like Coal India Ltd, General Insurance Corp and New India Assurance. They are now trading about 75% below their initial share sale prices.