India’s largest IPO: LIC listing draws interest from retail investors, big names like Singapore’s GIC despite inflation, war worries

Russia’s invasion of Ukraine, inflation worries, monetary tightening and slowing economic growth did not deter investors from buying all 221 million LIC shares

India’s government is desperate for proceeds from the sale of its 3.5 per cent stake in Life Insurance Corporation to help plug a shortfall in its budget

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LIC (Life Insurance Corporation of India) is set to become India’s largest ever IPO, which is estimated to raise US$2.7 billion. Photo: Reuters

Published: 5:00pm, 7 May 2022

Investors have lapped up India’s largest-ever public offering by Life Insurance Corp of India, drawn by the state-run behemoth’s market dominance and appealing valuation.

Analysts said the Initial Public Offering (IPO), set to raise as much as US$2.74 billion, had been priced to sell in a market rattled by Russia’s invasion of Ukraine and worries over inflation, monetary tightening and slowing economic growth.

The share offer, which opened on Wednesday and closes on Monday, was set to eclipse the US$2.5 billion raised last November by One97Communications, parent of digital payments giant Paytm, in its IPO. LIC’s bumper offer of 221.4 million shares was fully subscribed on day two in sharp contrast to Paytm’s IPO that sold out only on the final day.

A man walks past a promotional poster of the state-owned insurance group and investment company Life Insurance Corporation (LIC) in Mumbai on Thursday. Hoping to generate US$2.7 billion, the country’s record IPO was oversubscribed after just two days. Photo: AFP

The 65-year-old insurance giant has assets of US$495 billion – greater than the Gross National Product of countries like Argentina and South Africa. The company is a household name in India with 1.35 million agents across the country, even in the most remote corners, giving LIC remarkable market reach. Many first-time investors opened stock market accounts just to invest in the company whose valuation makes it the cheapest in the sector.

“Demographic tailwinds” thanks to India’s 1.4-billion population and still widespread under-penetration of the insurance market will fuel the industry’s “multi-decadal growth” and LIC, as market leader, “is poised to benefit,” Samco equity research head Yesha Shah said.

Generous discounts being offered to small investors, employees and policyholders to buy LIC shares were “the cherry on the cake,” Shah added.

Proceeds from the issue will go to help plug the cash-strapped government’s yawning budget deficit which has been stoked by soaring commodity prices as the Ukraine war drags into its third month.