LIC IPO: How The Market Gears Up For India’s Biggest-Ever Stock Listing

Analysts have pointed out that the LIC IPO could be India’s Aramco moment, referring to the Saudi oil major’s $29.4 billion public listing in 2019, the world’s largest stock listing to date

If all necessary regulatory approvals are obtained in time, the LIC issue will open on March 10 and close on March 14. Image: Getty

New Delhi: Life Insurance Corporation (LIC), the country’s largest insurer, has set the stage for India’s biggest-ever initial public offering (IPO), with the government offers to sell 5 per cent stake for an estimated Rs 63,000 crore, according to the draft papers filed with Securities and Exchange Board of India (Sebi).

The shares of the state insurer could be priced between Rs 2,000 and Rs 2,100 each with discounts to some retail investors, according to some reports.

If all necessary regulatory approvals are obtained in time, the issue will open on March 10 and close on March 14. There will be a 10 per cent discount for employees and policyholders.

According to some news reports, the government will approach large investors who have not yet anchored any Indian initial public offering (IPO) and those who focus only on large public offerings. The Centre is trying to connect with more than 180 investors.

Analysts have welcomed the LIC listing, however, raised doubts over its timing, as they think high inflation, Russia-Ukraine conflict, new Covid variant could pose a challenge for investors.

According to a report in The Ken, LIC owns a piece of around 280 listed firms. However, its mammoth investment book is like a double-edged sword for the life insurer’s valuation, and LIC’s complicated relationship with the government certainly doesn’t help.

LIC, which is the country’s largest asset manager, has far more sway on India’s exchanges than any other investor. As of February 11, LIC’s investments were worth $129 billion, which is more than the combined holdings of the next four largest investors. And, it doesn’t include companies in which LIC holds less than 1 per cent.

Some market analysts are expecting high dividends from the IPO. Some bankers have called the LIC IPO as India’s Aramco moment, referring to the Saudi oil major’s $29.4 billion public listing in 2019, to date the world’s largest IPO.

Bloomberg reported a further 35 per cent, or Rs 21,0000 crore, based on the estimated valuation, will be sold to lakhs of retail investors. That’s a challenging ask considering last year’s performance of digital payments provider Paytm, which managed to oversell its retail book by 1.7 times compared to a 2.8 times over-subscription for its institutional investors. By comparison, LIC’s retail book will be 12 times larger.

A knock-out listing could see LIC raise as much as $10 billion from the IPO with a minimum dilution of 5 per cent. That would make it the third biggest globally involving an insurer.

There are a few concerns too.

About one third of new listings on the BSE Sensex are trading below their offer prices. Paytm, which raised $2.5 billion in November, India’s largest IPO at the time, has sunk nearly 59 per cent since its debut, leaving many investors deep in the red.

Indian markets suffered a sharp decline recently due to high volatility, mostly because of weak global cues.

However, LIC is banking on its 13 lakh agents and 25 crore policyholders to get to the finish line without any hiccups.

As the government prepares for the biggest-ever public listing in India, virtual roadshows with investors have also started, officials said.

Roadshows have begun and pricing could change after assessing investor appetite and discussions with the government, which owns LIC, the people said. 

The government eyes about Rs 63,000 crore by the end of March to meet its asset-sale target, based on calculations from the Union Budget estimates.