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LIC IPO still largest despite cut in issue size: Issue to be 11th largest in world by an insurer

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Despite the size getting trimmed, the initial issuance of Life Insurance Corporation of India (LIC) is set be the largest public offer so far by any Indian entity and the 11th largest in the world by an insurance player. The issue leaves behind the maiden issue of One97 Communications, the parent firm of Paytm that came last year with an issue size of Rs 18,300 crore.

Post issue, the insurance behemoth will be valued at about Rs 6 trillion, based on the upper end of the price band at Rs 949. Also, upon successful listing, LIC would become the fifth-largest Indian company in terms of market capitalisation after Reliance Industries, TCS, HDFC Bank and Infosys.

Among the insurance space, Hong Kong-based AIA Group had the largest issue with $20.4 billion, followed by Dai-ichi Life Holdings with an offer size of $11.1 billion, data sourced from Bloomberg showed. With a 61.6% market share in terms of premiums and 1.33 million agents, LIC is the third-strongest global insurance player with 279 million policies being serviced. Moreover, LIC has the highest gap in market share with respect to the second-largest life insurer in the Indian market, as compared to market leaders in the top seven markets globally.

According to Sonjoy Chatterjee, chairman and CEO of Goldman Sachs India, this is being an unthinkable and unseen in any contest – probably private, government or non-government – and that is the real acknowledgment today. More importantly, regarding the timing and valuation, India is possibly the only market that can afford and give an offering this size and stature in a volatile global environment like this. “It’s a sign of India’s revised standing, not just in the context of growth and capital markets, but also its revised stand in geopolitical order and how it is going to attract future capital flows. It reflects all of that to have confidence to come and launch an issue of $3-billion size, which no other market has seen over the last three to four months,” said Chatterjee.

During the first nine month of FY22, the life insurance giant booked profit worth Rs 42,862 crore from sale of investments, showed its revised draft papers for its IPO. While the Sensex and Nifty surged about 18% each during the first nine months of FY22, the total investment in equity as of the nine months ended December 2021 stood at Rs 9.85 trillion, against Rs 7.97 trillion in FY21.

As of September 2021, the embedded value LIC stood at Rs 5.397 trillion, which is 1.1x of the AUM of the entire Indian mutual fund industry and 17% of the country’s GDP. LIC is the fifth-largest life insurer globally by GWP.

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