LIC IPO looks to small-town investors
India’s largest ever share sale expects to raise up to $2.7b
Small-town retail investors with an emotional attachment to India’s oldest insurer and its long-loyal policyholders will likely prop up demand for the country’s largest-ever initial public offering, even as jittery markets forced the deal size to be slashed by more than half.
State-run Life Insurance Corporation of India is taking orders from retail investors between May 4 through May 9 in a listing that could, at the new reduced price range, raise up to $2.7 billion. Russia’s invasion of Ukraine and rising US interest rates are putting foreign funds off emerging market stocks, but investment advisers say the mammoth insurer’s float will likely be lapped up by momand-pop investors.
‘It’s their company’
“There are IPOs and then there is the LIC share sale. Both are entirely different things,” said Pallav Bagaria, a director at Sapient Wealth Advisors & Brokers Ltd. “The insurer has had an association with an entire generation of people, and they want to buy LIC because they feel it’s their company.”
Founded in the late 1950s, LIC was the country’s only insurer until the government opened up the market to private competition in 2000. It remains India’s largest insurer with a sales agent in almost every neighbourhood in even the smallest towns.
India’s government is selling 221.4 million LIC shares at between Rs902 and Rs949 each, which would raise as much as Rs210 billion at the top end of the range — far below the Rs500 billion target earlier.
Retail investors will be allotted 35 per cent of the total shares in the offer, and given a discount of Rs45 from the IPO price; 10 per cent of the float, meanwhile, has been earmarked for LIC’s policyholders, who will receive a Rs60-discount on each share. The minimum bid lot size is 15 shares, which means a retail investor would have to shell out at least Rs13,560 ($177) for a stake. Policy holders have to spend at least Rs13,335.
“This investment is like insurance. We are sure that we are not going to get trapped in a wrong company or some fly-by-night operator,” said 74-year old Ravi Gogia, a former employee of Tata Steel Ltd, who plans to bid for LIC’s shares in the IPO.