For almost two years, India has been preparing for the country’s biggest-ever stock listing. The country’s largest insurer, Life Insurance Corporation of India (LIC), has assets of more than $500 billion. The main element causing a delay in the LIC IPO is a complication in the valuation.
LIC, which has over two thousand branches and almost 300 million insurance policies distributed across the nation, is a household name in India. With its gigantic size, there are many complications in its listing process.
With its offering, the LIC is expected to compete with the world’s largest IPO of Aramco of the Gulf. It will test the appetite of domestic as well as the global investors for Indian stocks, especially the government-owned insurance giant.
As it’s planned to launch in March, there are around two months to go. The consultants are busy coming up with draft policies and valuation metrics.
Foreign investors are worried about the autonomy of institutions that are regularly asked to rescue distressed firms. They also worried if the old companies would be able to compete against new entrants. However, the global investors believe that a successful listing of LIC could up the game for India across the world by changing India’s global image.
For potential investors, finding the financial performance of the company as of now is a task. The balance sheet of a life insurer is only released once a year, which leaves it with no publicly available numbers to determine its embedded value.
Comparison of LIC with its peers
Again, comparing LIC with its peers is another task. LIC, which was established in 1956, follows a unique set of rules that governs the country’s insurance industry. An example would be that the property holdings of LIC were valued at about $5.8 billion in March 2020. It is not clear if these were marked to the current market value or not.
The Impact LIC IPO could bring
A knock-out listing of LIC, which could raise up to $10 billion, would help plug India’s fiscal deficit and boost investor confidence. In rural areas, many people are taking advantage of the opportunity to receive a piece of the pie by preparing themselves. This is also the reason why LIC has started sending out SMS blasts to its agents.
The LIC IPO is expected to bring many new investors into the stock market. Many have already started opening DEMAT accounts based on all the LIC news that is spread around the country.
The Road Ahead
The company is expected to file its draft LIC IPO prospectus in the last week of January. It will provide details about the IPO, including the number of shares that will be sold, LIC IPO dates, and the embedded value. India’s largest life insurer, LIC, has set a March deadline for its IPO. The government wants to sell about $23 billion worth of assets to plug the budget deficit.
While some investors believe that the gigantic IPO will change the face of India’s economy, others are critical about the whole divestment process. With mixed sentiments about the IPO, we have to wait and see how things unfold in the coming time as the listing comes closer.
What is Draft Red Herring Prospectus?
A draft red herring prospectus is a document that shows potential investors how a new product or service will be introduced. A good product vision should be able to communicate the company’s vision and target audience. This should also help investors make informed decisions regarding the company.
As a policyholder of LIC, how can you apply for the LIC IPO?
Firstly, you need to link your PAN with the policy which is eligible for the IPO. You can link the PAN either online or by contacting your branch. Secondly, you need to have a valid DEMAT account with a bank account with online payment service like UPI or net banking. Once you have these, you can easily apply using your broker’s platform after the IPO is launched.
What will be the size of the LIC IPO?
The size of the LIC IPO is expected to be $10 billion. Further details will be available once the company files a draft prospectus with the Securities and Exchange Board of India which is expected by the end of January 2022.
Disclaimer: This blog is exclusively for educational purposes and does not provide any advice/tips on investment or recommend buying and selling any stock.