NEW DELHI – A highly anticipated initial public offering for Indian life insurance company Life Insurance Corp. began this week and retail investors were allowed to subscribe to its shares from Wednesday.
The IPO, which is expected to raise up to $2.74 billion, is India’s largest ever. Its partial listing is part of Prime Minister Narendra Modi’s plans to privatize certain industries and bail out state coffers, and analysts expect massive interest, especially from new investors.
The offer was reduced to 3.5% of the company’s equity from 5%, given the uncertainties in global markets, such as the war in Ukraine and the tendency to increase interest rates for combat inflation, which has driven down stock prices in many markets.
The Indian government has also pushed back the share offering from March to May, taking into account market conditions.
SR Srinivasan, an investment advisor, said the company is one of India’s most trusted brands. “So it has a market share above 60% – it’s rare. There are very few places in the world where you find a player with a 60% market share,” he said. declared.
The insurance giant said it raised $731 million in an offering to anchor investors earlier this week, the Press Trust of India news agency reported.
The expanded public offering ends Monday and the company’s shares are expected to begin trading May 17.
The government previously hoped to raise about $8 billion by selling the larger 5% stake in the company at a higher price.
But Tuhin Kanta Pandey, secretary at the Ministry of Finance’s Department of Investment and Public Assets Management, said the current size of the IPO was okay given current market conditions.
“While global sentiments are weak, Indian markets are strong due to domestic flows,” Pandey said.
Shashank Agarwal, founder of wealth management firm Addwise Capital, said the small size of the IPO increases the chances of it being oversubscribed.
According to the offering prospectus, the government will sell up to 221 million shares for 902 rupees at 949 rupees ($11.78-$12.40) per share, with a discount of 60 rupees for policyholders and 45 rupees for retail investors and employees.
The IPO values the company at nearly 6 trillion rupees ($80 billion). Government estimates in February put the value of the insurer at 14 trillion rupees, according to media reports.
The large discrepancy between current and prior valuation estimates has prompted the opposition Congress party to criticize the government over the IPO.
Randeep Singh Surjewala, a party spokesman, said he did not oppose the share offering.
“But the intent, purpose and modus operandi of the government’s desperation to list LIC’s IPO, despite lower valuations, failing to consider key valuation indices, global uncertainties and a volatile market, are deeply intriguing and highly debatable,” Surjewala said.
Rahul Jain, director of the Department of Investment and Public Assets Management, defended the listing and said the response to the IPO launch was wonderful.” More than 60 million policyholders have already indicated that they would subscribe to the IPO, he said.
Srinivasan also questioned the quality of the company’s management, saying the insurer often steps in to rescue or help private companies when they run into trouble. “It is the constant concern – that LIC’s assets are not as well managed as those of its private peers – there is a feeling that they are making investments that are decided by government rather than prudent financial decisions” , did he declare.
Nevertheless, the business is profitable, he conceded. The latest after-tax net profit was $391 million, according to a prospectus filed last month.
“It’s going to be a very closely watched IPO and I wouldn’t be surprised if it was massively or oversubscribed,” Srinivasan said.