LIC’s mega share launch
SIZE OF OFFERING REDUCED BUT IS COUNTRY’S LARGEST TO DATE
INDIA slashed the size of an initial public offering by insurance giant LIC, but the share issue will still be the country’s largest to date, with a targeted windfall of $2.7 billion (£2.15bn), regulatory filings showed last Wednesday (27).
Prime minister Narendra Modi’s government is desperate for proceeds from the IPO by Life Insurance Corporation of India and the sale of other state assets to help fix tattered public finances.
The long-awaited IPO – originally slated for March – will open this week, the filing seen by AFP showed, after the government chose to wait out recent market volatility triggered by the Russian invasion of Ukraine. “While global sentiments are weak, Indian markets are resilient,” finance ministry official Tuhin Kanta Pandey told reporters. “This is an opportunity for the Indian consumer to participate in the wealth creation of one of India’s most valuable corporations,” he said.
But the adverse market conditions did force the government to substantially cut its stake sale to 3.5 per cent, down from five per cent.
The government will sell 221 million shares within a price band of `902 to `949, the prospectus showed.
This implies an IPO size of between `200bn and `210bn ($2.61bn/ £2.08bn to $2.74bn/ £2.18bn), overtaking that of payments firm Paytm, which raised $2.5bn (£1.99bn) in November in India’s largest public share sale to date.
The offer values LIC at $78bn (£62.26bn) and follows a years-long effort by bankers and bureaucrats to appraise the mammoth insurer and ready it for listing.
Founded in 1956 by nationalising and combining 245 insurers, LIC was for decades synonymous with life insurance in post-independence India, until the entry of private companies in 2000.
It continues to lead the pack with a 61 per cent share of the life insurance market in a country of 1.4 billion people, with its army of 1.3 million “LIC agents” giving it huge reach, especially in rural India.
LIC’s market share has, however, declined steadily in the face of competition from net-savvy private insurers offering specialised products.
The firm warned in its regulatory filing that “there can be no assurance that our corporation will not lose further market share” to private companies.
The insurer is also India’s largest asset manager, with `39.55 trillion (£412bn) under management as of September 30, including significant stakes in Indian blue chips like Reliance and Infosys.
The government hopes LIC’s IPO will attract legions of first-time investors to the stock market, in a country where less than five per cent of people have trading accounts. It will be a crucial step in Modi’s policy to “monetise and modernise” state-run firms and plug an estimated `16.6 trillion ((£173bn) fiscal deficit this financial year.
Going public will demand the insurance behemoth submit itself to a greater degree of operational transparency. “The next two quarters will be an acid test,” independent markets commentator Srinath Sridharan told AFP. “They’re not used to this kind of scrutiny or being asked questions – except by the Ministry of Finance.”
LIC’s real estate assets include vast offices at prime urban locations, including a 15-storey office in Chennai. The firm is also believed to own a large collection of valuable artwork that includes paintings by MF Husain although the value of these holdings has not been made public.