India: State Life Insurer Slated For Record-Breaking IPO

Considered the Indian government’s crown jewel, LIC is valued at approximately $203 billion and has assets worth more than $500 billion.

Indian Prime Minister Narendra Modi’s decision to list state-owned insurance behemoth Life Insurance Corporation of India (LIC), destined to be the largest IPO in the country’s history, has enthused both domestic and foreign investors.

Considered the Indian government’s crown jewel, LIC is valued at approximately $203 billion and has assets worth more than $500 billion. Its IPO, which is expected to raise almost $8 billion, opens in mid-March and will top the prior record, set by payments gateway Paytm’s $2.5 billion debut issuance in November.

Analysts have compared LIC’s issuance with Saudi Armaco’s epic $29.4 billion offer in 2019, which led to the sale of 450 million shares. The LIC issuance is important for two reasons. First, it will help trim India’s fiscal deficit to 6.4% of GDP in the current financial year ending March 2022. It will also allow Modi’s government to meet its disinvestment and privatization target at scaled-down levels of $10 billion, from an initially estimated $24 billion. Key to the success of the LIC issuance, say independent analysts and market insiders, will be pricing.

LIC is a household name in Indian insurance and holds a 64% market share. With 2,000 branches, 100,000 employees and 2.5 million agents, its public offering is the third-largest in the insurance industry globally after AIA’s $20.5 billion offering in 2010, followed by Japanese insurer Dai-ichi Life’s $11 billion listing.

When 5% of LIC’s stock (316 million shares) are sold, top foreign investors like GIC Re, Canada Pension Plan Investment Board, Blackrock and Abu Dhabi Investment Authority are likely to line up with block deals. They have already expressed keen interest. In March last year, the Indian parliament increased the foreign direct investment limit in the broader insurance sector from 49% to 74%. However, Reuters reported in September that the Indian government had only permitted foreign investors to buy up to 20% of the insurer.

A prospectus filed with the Securities Exchange Board of India stated that 5% of shares on offer would be exclusively set aside for LIC policy holders. The company holds 286 million policies and was the fifth-largest premium collector in 2020.

SBI Capital Markets, Citigroup, Nomura, JPMorgan and Goldman Sachs, and five other domestic and international investment banks have been enlisted as lead managers and book runners on the IPO.