LIC, India’s largest-ever IPO, will check international investor urge for food


The LIC emblem looms above a few passersby in Mumbai in India final week. The IPO of the most important payer in life insurance coverage within the nation is predicted to fetch $2.7 billion within the nation’s largest IPO up to now.

Punit Paranjpe | Afp | Getty Photos

The dominant participant in India’s life insurance coverage market, Life Insurance coverage Company, opens its preliminary public providing for subscription Wednesday within the nation’s largest-ever IPO.

The federal government is promoting a 3.5% stake in state-owned insurance coverage behemoth LIC for an estimated $2.74 billion. The company will supply about 22.13 million shares for between 902 and 949 Indian rupees, or the equal of $11.78 to $12.39 a share at Tuesday’s trade charges.

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Trusted by tens of millions and with huge attain throughout the nation, LIC is second solely to financial institution deposits as a haven of financial savings in India. Between 2019 and 2021, LIC’s share of family monetary financial savings grew 3.4 proportion factors to 19.4%. That is forward of pension funds’ 16.7% share, whereas financial institution deposits dropped 7.1 proportion factors to 29.4% throughout the identical interval.

LIC had a monopoly in India’s insurance coverage market till 2000 and continues to be the dominant participant, commanding about two-thirds of the life insurance coverage market. Within the fiscal yr ending March 2021, LIC’s market share stood at 64.14%, down marginally from 66.22% within the earlier yr.

IPO timing

The IPO, initially deliberate for February, was postponed due to the Ukraine warfare and the outflow of institutional funds from the inventory market. Since January, about $16 billion of international capital has left Indian markets. The dimensions of LIC’s providing, which was initially pegged at 5%, was scaled down to three.5%.

There is no such thing as a good time for an IPO. Given the excessive liquidity in worldwide markets it is pretty much as good a time as any.

Arvind Virmani

Former chief financial advisor to the federal government of India

The corporate’s present implied valuation of $80 billion is roughly half of what it was in February, falling a minimum of partly resulting from market situations. It had beforehand deliberate to supply a 5% stake for about $8 billion.

Talking to CNBC, former chief financial advisor to the federal government of India, Arvind Virmani, dismissed speak of the IPO being badly timed.

“There is no such thing as a good time for an IPO. Given the excessive liquidity in worldwide markets it is pretty much as good a time as any,” he stated.

International traders

Of the shares being provided, 20% is open to international traders and 10% is earmarked for policyholders.

LIC, which has an estimated base of 250 million policyholders, is an asset-rich group. As of March 2021, LIC’s asset base had surpassed $520 billion, with investments of $503 billion and a life fund of $470.70 billion.

The complexity and scale of the LIC IPO indicators the federal government’s intent to go one step additional than earlier governments.

Suyash Rai

Deputy director and fellow, Carnegie India

Talking to CNBC, deputy director at Carnegie India, Suyash Rai, stated the LIC IPO provides home and international traders a possibility to spend money on a agency that controls about two-thirds of the life insurance coverage market in India. He stated whereas the itemizing is a “continuation of a a long time outdated coverage of itemizing public sector monetary companies,” LIC nonetheless stands out. 

“The complexity and scale of the LIC IPO does sign the federal government’s intent to go one step additional than earlier governments,” Rai stated.

In a sign of its dedication to reforms within the monetary sector, the federal government final yr raised international fairness in insurance coverage to 74% from 49%.

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