State-run Insurer LIC Plans to raise $8 Billion in India's Largest Initial Public Offering

Indian governmentrun insurer Life Insurance Corporation of India filed draught papers with the market regulator, stating plans to sell 5% of its stock in the country's largest initial public offering (IPO) to generate almost $8 billion.

According to the draught prospectus, Prime Minister Narendra Modi's administration intends to sell 316 million shares in the wholly-owned insurer.

Its initial public offering (IPO) is the latest in Modi's privatisation drive to support the government's expansionary budget.

The company's "embedded value," a crucial indicator used by insurers, is estimated to be $71.56 billion.

Insurers' market worth is often three to five times that of their embedded value.

LIC has stated that it will not issue any new shares in the initial public offering.

The LIC IPO, which has been compared to India's Aramco moment, comes as the Sensex, the country's benchmark stock index, is still trying to recover from the recent sell-off, and many tech companies, including Paytm, which filed for a $2.2 billion IPO last year (at the time, the country's largest), Zomato, Policybazaar, and Nykaa, have fallen to record lows in recent weeks. It also doesn't help that the market value of the past three government-run enterprises with major IPOs has dropped by more than half since their initial public offerings.

However, New Delhi may be banking on the LIC brand's considerable familiarity to make a strong launch. The company, which has over 2,000 branches and employs more than 105,000 people in the South Asian region, lists "the President of India, working via the Ministry of Finance, Government of India" as its promoter in its filing. According to the draught prospectus, the 65-year-old Mumbai-based corporation has over $530 billion in assets and 286 million policies in force. It stated its earnings increased to $191 million in the six months ended in September of last year.

“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.

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