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Thin slice of LIC

A reduced 3.5% stake will be sold in a band of  ₹902-949 per share to help the government raise about  ₹21,000 crorePremium
A reduced 3.5% stake will be sold in a band of 902-949 per share to help the government raise about 21,000 crore

LIC shares have intrinsic value, as they embody a right to a slice of its earnings in perpetuity that aren’t subject to market fluctuations. Dividends could rise if post-listing market discipline spurs efficiency at LIC, but with such a thin slice of ownership going public, this effect will be muted

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After a long wait, Life Insurance Corp. (LIC) of India’s initial share sale is at last set to open for subscription next week. A reduced 3.5% stake will be sold in a band of 902-949 per share to help the government raise about 21,000 crore. Apart from the issue size, its valuation has also been lowered.

Both moves seem pragmatic, given the uncertainty clouding equity markets amid pressures from the war in Ukraine. The government would have liked to raise more money, given how hard-pressed it is to fund its expenditure. Had the Centre acted last year when conditions were more favourable, it may have drawn in a larger sum. But then, it’s best not to try timing the market. Apart from its scope for error, such efforts draw into focus the Centre’s fundraising goal rather than the investor value on offer. LIC shares have intrinsic value, as they embody a right to a slice of its earnings in perpetuity that aren’t subject to market fluctuations. Dividends could rise if post-listing market discipline spurs efficiency at LIC, but with such a thin slice of ownership going public, this effect will be muted. Even so, perhaps close analyst attention and the tracking of LIC’s stock price can make a difference.

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