LIC, India’s largest-ever IPO, will test foreign investor appetite
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In Mumbai, India last week, the LIC logo towered above a few passers-by. In the largest IPO in India so far, the country’s largest payer of life insurance is likely to be valued at $2.7 billion.
Punit Paranjpe | Afp | Getty Images
Life Insurance Corporation is India’s dominant life insurer and will open its first public subscription offering Wednesday. This is the largest ever IPO in India.
For $2.74 billion, the government will sell a 3.5% share in LIC, the state-owned insurance company. About 22.13 Million shares will be offered by the corporation for 902-949 Indian rupees. This is equivalent to $11.78-12.39 per share according to Tuesday’s exchange rates.
Trusted and respected by millions, LIC has a huge reach throughout India. It is the second largest savings haven in India after bank deposits. Between 2019-2021, LIC saw a rise in household savings. 3.4 percentage points to 19.4%. This is more than the 16.7% pension fund share. Bank deposits fell 7.1 percent to 29.4% over that same time.
LIC owned a monopoly in India’s insurance market until 2000LIC is the market leader, still holding about two-thirds in the life insurance industry. LIC had a market share of 2% in the March 2021 fiscal year. 64.14%, down marginally from 66.22%The previous year.
Timing of an IPO
The IPO was originally scheduled for February but was cancelled due to war in Ukraine and withdrawal of institutional funds. Since January about $16 billion of foreign capitalIndian markets. The original size of LIC’s offering was originally pegged at The original 5% was reduced to 3.5%.
There’s no ideal time to go public with an IPO. The high liquidity on international markets makes it a good time.
ArvindVirmani
Former chief economic adviser to the Government of India
Current implied valuation for the company is $80billion. This falls at least partially due to changing market conditions. It previously had planned to offer about $8 billion a 5% stake.
Arvind Virmani was the former chief economic adviser to India’s government. He dismissed any talk about the IPO coming too soon.
An IPO is not a time that’s perfect. It’s a great time because there is so much liquidity on international markets,” he stated.
Foreign investors
The shares are open for foreign investors at 20% and policyholders at 10%, respectively.
LIC is estimated to have a base of 250,000,000 customers The policyholders is an asset rich organization. LIC was established in March 2021. asset base had surpassed $520 billionWith investments totalling $503 billion, and a $470.70 billion life insurance fund.
It is clear that this government wants to move beyond the previous governments by introducing a complex and massive IPO for LIC.
Suyashrai
Carnegie India Fellow and Deputy Director
Suyashrai, the deputy director of Carnegie India spoke to CNBC. He said that the LIC IPO allows foreign and domestic investors to get into a company that has control over about two-thirds India’s insurance market. While the listing will continue a long-standing policy of listing financial institutions in public sectors, LIC is still unique.
Rai explained that “the complexity and magnitude of the LIC IPO signals the government’s intention to go one more than other governments.”
Last year, the government raised $2.5 billion to show its support for reforms within the financial sector. foreign equity in insurance to 74% from 49%.
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