India’s largest start-up public offering will test the will of foreign investors

Life Insurance Corporation, the dominant player in India’s life insurance market, opens its underwriting initial public offering on Wednesday in the largest IPO in the country’s history.

The government is selling a 3.5% stake in state-owned insurance company LIC for $ 2.74 billion. The corporation will offer approximately 22.13 million shares at 902 to 949 Indian rupees or $ 11.78 to $ 12.39 per share at the exchange rate on Tuesday.

Trusted by millions, LIC is the second largest safe haven in India after bank deposits across the country. Between 2019 and 2021, LIC’s share of household finances increased. 3.4 percentage points to 19.4%. It surpasses the 16.7% share of the pension fund, while bank deposits are down 7.1 percentage points to 29.4%.

SCI was Monopoly in the Indian insurance market until 2000 It dominates about two-thirds of the life insurance market. For the financial year ended March 2021, LIC had a market share of Rs 64.14%, slightly down 66.22% In the previous year.

The IPO, originally scheduled for February, was postponed due to the war in Ukraine and the withdrawal of corporate funds from the stock market. From January, About $ 16 billion in foreign capital Left the Indian markets. The amount of the LIC offer initially set up Reduced to 5%, 3.5%.

The company’s current indirect value of $ 80 billion is half of what it was in February, at least due to market conditions. It had previously planned to issue a 5% stake for about $ 8 billion.

Speaking to CNBC, Arvind Virmani, India’s former chief economic adviser, dismissed talk of a bad IPO timing.

“There is no right time for an IPO. This is a good time at any time as there is more cash flow in the international markets, ”he said.

Of the shares offered, 20% will be open to foreign investors and 10% to policyholders.

LIC with an estimated value of Rs 250 crore Policyholders are an asset-rich company. As of March 2021, LIC The property base has surpassed $ 520 billionWith $ 503 billion in investments and $ 470.70 billion in life funding.

Speaking to CNBC, Suney Roy, Deputy Director, Carnegie India, said LIC’s initial public offering was an opportunity for domestic and foreign investors to invest in a company that controls two-thirds of the life insurance market in India. He said although the list was “a continuation of a decades-long policy of listing public sector financial institutions”, LIC still stands out.

“The complexity and scale of LIC’s initial public offering indicates the government’s intention to go one step further than previous governments,” Roy said.

The government raised it last year as a sign of its commitment to reform the financial sector 49% to 74% of foreign capital in insurance.