Alvin M. Keeling 
The capital market could be a master of the difficult task. Life Insurance Corporation of India (LIC), the country’s largest life insurance company, may have realized this by now. LIC, which is also a government-run company, expected the market to give it a valuation of Rs 10-12 lakh crore when it started the listing process. But Finance Ministry officials overseeing the entire process only realized their folly when the company approached investors ahead of listing. In the end, the government cut the valuation by almost half to Rs 6 lakh crore.
It is true that adverse stock market conditions have spoiled the party, but to blame the markets entirely for the decline in valuations would be to push the limits of logic a little too far. LIC’s IPO languishes at a sub-Rs 4.5 lakh crore valuation now, barely a month after listing. This is despite the fact that LIC is a market leader with a wide margin with 64% share in terms of total premium. A concerned government now says it is looking for ways to address the loss of investor confidence in the company.
However, keeping up with chops is not easy. Remember the listing of Coal India, a monopoly coal mining player in India? Its stock price is currently trading 43% below its listing price. These debacles offer hard lessons for business and government alike. Stock markets do not necessarily “reward” a company for being the market leader or a monopoly unless it demonstrates continuous improvement and efficiency. As long as you’re an unlisted company, you can get away with a lot of inefficiencies, nonsense, and opacity.
But once you get listed and submit yourself to the regulatory oversight of the Securities and Exchange Board of India and the scrutiny of shareholders, you can’t get away with it. Investors are quick to punish you for any missteps. Investors can sometimes be irrational, but they correct their position as soon as possible. They will strongly support good performers but be brutal with misfires. Many new era tech companies that tried to cash in on the easy money of the system in 2020-21 by getting listed at high valuations are now discovering the hard truth.
