By
Godfrey Benjamin
February 14th, 2022
The LIC is the dominant life insurance provider in India with an estimated investment of $503 billion and a life fund of $470.70 billion.
The Life Insurance Corporation (LIC) is gearing up for India’s largest Initial Public Offering (IPO) ever as the government-owned institution is offering both local and foreign investors as much as a 3.5% stake. The stake is valued at about $2.74 billion for a total of 22.13 million shares that will be priced between 902 and 949 Indian rupees or the equivalent of $11.80 to $12.42 dollars.
The investment offering in the Life Insurance Corporation was cut down from 5% to 3.5% considering the changing dynamics in the financial market as an aftermath of the Russia and Ukrainian war. Since February when the war broke out, as much as $16 billion of foreign capital has left the Indian market, a trend that threatens the IPO which is notably being targeted at foreign investors in particular.
According to filings, 20% of the IPO offering is reserved for foreign investors while 10% is earmarked for policyholders. The LIC is a company that has a very strong affiliation with policyholders whose network of these professionals runs up to 250 million.
The LIC is the dominant life insurance provider in India with an estimated investment of $503 billion and a life fund of $470.70 billion. The company commands a total asset base of $520 billion. While the company has maintained its monopoly in insurance offerings in India with a two-thirds stake in the market, the overall valuation of the company which was around $80 billion as of February is now halved, as the insurance ecosystem has also taken a beating in tandem with global economic realities.
The investment in LIC is also considered a viable one judging by the growing savings deposit the firm has recorded in the past few years. Deposits received by the LIC trail only bank deposits in terms of valuation were pegged at 19.4% after growing 3.4 percentage points in the first quarter.
Time Suitability of India’s Life Insurance Company IPO
Amidst the broad happenings in the global financial landscape, many have questioned whether the timing of India’s Life Insurance Company IPO is right. Considering that it has been postponed once, former chief economic advisor to the government of India, Arvind Virmani said in an interview with CNBC that “There is no perfect time for an IPO. Given the high liquidity in international markets it’s as good a time as any.”
Additionally, the way in which the Indian government is going all out with respect to this IPO is a convincing factor, especially for foreign investors that there is enough safeguard to protect the company’s market dominance, while also building on its legacy for new innovations.
“The complexity and scale of the LIC IPO does signal the government’s intent to go one step further than previous governments,” said Suyash Rai deputy director at Carnegie India.
