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 provide 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 change charges.
Trusted by thousands and thousands 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 percentage points to 19.4%. That is forward of pension funds’ 16.7% share, whereas financial institution deposits dropped 7.1 share factors to 29.4% throughout the identical interval.
LIC had a monopoly in India’s insurance market until 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 foreign capital has left Indian markets. The dimensions of LIC’s providing, which was initially pegged at 5%, was scaled down to three.5%.
The corporate’s present implied valuation of $80 billion is roughly half of what it was in February, falling a minimum of partially as a consequence of market circumstances. 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 perfect time for an IPO. Given the high liquidity in international markets it’s as good a time as any,” he stated.
Foreign buyers
Of the shares being supplied, 20% is open to foreign buyers 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.
Talking to CNBC, deputy director at Carnegie India, Suyash Rai, stated the LIC IPO provides home and foreign buyers a possibility to put money into 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 decades old policy of listing public sector financial firms,” LIC nonetheless stands out.
“The complexity and scale of the LIC IPO does signal the government’s intent to go one step further than previous governments,” Rai stated.
In a sign of its dedication to reforms within the monetary sector, the federal government final yr raised foreign equity in insurance to 74% from 49%.
