Learnings from LIC must guide PSU stake selloffs

The government should offload PSU stakes even on market dips, woo value investors, and signal that it's offering reasonably priced shares, not just trying to maximize its revenue

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Investors who had subscribed to the Life Insurance Corporation (LIC) of India initial share sale in May last year would be a disappointed lot today. As against the issue price of 1949 apiece, the stock closed at ₹605 on the BSE on Monday. This implies that state-run LIC has lost more than a third of its value since then. So, what went wrong? To be sure, shares can drop for a variety of reasons, including market trends beyond a company's control. But many investors would've been left with the impression that the issue was overpriced. Since retail investors tend to repose faith in government enterprises, and LIC especially was a fancied business for its dominance of India's insurance sector, a high valuation may have got overlooked in the buzz over its stake sale. It suited the government. After all, the greater the valuation, the higher its disinvestment revenue. The downside is that the experience may have left investors somewhat wary of government stake issues in general. While this could cast a shadow on the Centre's disinvestment programme, it also argues for a p