Aramco-style dividend is what LIC investors seek post flop debut

Aramco-style dividend is what LIC investors seek post flop debut

Disappointed by a 7.8% plunge that made for the world’s second-worst trading debut among large IPOs this year, shareholders of state-run Life Insurance Corp. of India will be counting on a bumper dividend if Prime Minister Narendra Modi’s government wants them to stay put.

The 65-year-old insurer, a household name in the country known as LIC, raised $2.7 billion last week in the country’s biggest initial public offering. After pricing at 949 rupees ($12.2) apiece, the top end of a marketed range, the stock plunged as much as 9.4% to 860 rupees in opening minutes on Tuesday, before paring losses. It was about 1% in early trading on Wednesday.

Some investors and analysts are concerned that the price could drop even more because of little growth prospects for the legacy business, risks of further disinvestment by the government and the absence of major incentives for shareholders.

The stock is a “good portfolio hedge against volatility,” said Jayesh Bhanushali, assistant vice president for research at IIFL Securities Ltd., but the shares could face headwinds in the medium term if the government decides to dilute its stake in LIC further, he added. A “3%-4% regular dividend could be a sweetener that will make