Investing Basics - Feel free to ask the most basic questions

[brijwanth]

As answers mentioned above LIC has major problems. I will try to list them as crisply as possible

1. For decades, government used LIC as a last resort to boost the market whenever government wants to sell its stake be it IDBI/UTI or whatever govt enterprise in problem. So LIC is kind of last fund provider of funds to government.

2. Please go through the comparison I wrote for Big 4 Life insurance companies and you can understand that LIC lags on all parameters. Size matters but growth and profitability are more important for market.

Life Insurance Companies - Comparison

First a little Context in what we are trying to do here: As you must be aware that insurance is a business of taking on risk for a fee. The underlying financials of most of the insurance companies are almost like greek and latin, even for the well versed in accounting. The Insurance Industry and accountants simplify the whole financials in to simple monitorable parameters like VNB(Value of New Business), Mortality Rate, Types of Policies (Participating and Non-Par) etc. These figures take …

3. As @Mudit.Kushalvardhan said the supply of shares is going to come. Remember LIC is a very large company(as an aprrox. comparision it’s balance sheet is as large as India’s Budget) with respect to Indian market. Considering above SEBI has allowed it exemption from 25% free float. But on some day all those shares are going to get in to market.

4. LIC shareholders were expecting a premium listing but it proved a dud. Market has limited capacity in absorbing shares. So when expectations are negative and no one is willing to buy naturally share price comes down.

   May be I will correct my answer on free float. Free float is a multiplier for negative expectations it multiplies negatively and vice versa.

Hope I have cleared the FF story
All the best.