State-run insurer LIC seeks to raise $8 billion in India’s largest IPO

The Indian government-run insurer Life Insurance Corporation of India filed draft papers with the market regulator on Sunday, announcing its plans to sell 5% of its shares to raise nearly $8 billion in the country’s biggest IPO.

The Narendra Modi’s government plans to sell about 316 million shares in the wholly-owned insurer, the draft prospectus said. Its IPO is the latest in Modi’s privatization drive to fund its expansionary budget. The firm’s so-called “embedded value,” a key metric among insurers, is pegged at $71.56 billion. The market value of insurers is typically between three and five times of the embedded value. In the initial public offering, LIC does not plan to issue any new shares, it said.

The initial public offering of LIC, which is being compared to India’s Aramco moment, comes at a time when Sensex, the country’s benchmark stock index, is still attempting to recover from the recent sell-off and many tech companies including Paytm, which filed for a $2.2 billion IPO last year (which at the time was the country’s largest), Zomato, Policybazaar and Nykaa have dropped to record lows in recent weeks. It also doesn’t help that the previous three governmemt-run companies with large IPOs have lost more than half their market value since their listings.

Growth in total premium for the life insurance industry in India (LIC)

But New Delhi might be counting on the strong familiarity of the LIC brand for a strong debut. The firm, a household name in the South Asian market and which describes “the President of India, acting through the Ministry of Finance, Government of India” as its promoter in the filing, has over 2,000 branches and employs more than 105,000 individuals.

The 65-year-old, Mumbai-headquartered firm, which was set up by the government after over two dozen insurance players shut down, maintains over $530 billion in assets and has 286 million policies in force, it said in the draft prospectus. Its profit stood rose to $191 million in the six months ending in September last year, it said.

“Our corporation has been providing life insurance in India for more than 65 years and is the largest life insurer in India, with a 64.1% market share in terms of premium (or GWP), a 66.2% market share in terms of new business premium (or NBP), a 74.6% market share in terms of number of individual policies issued, a 81.1% market share in terms of number of group policies issued for fiscal 2021, as well as by the number of individual agents, which comprised 55% of all individual agents in India as at March 31, 2021,” it said in the prospectus.

Its IPO book runners include Kotak Investment Banking, Goldman Sachs Securities, JP Morgan, Axis Capital, ICICI Securities, SBI Capital Markets, and Bank of America Securities.