India’s largest insurance company LIC in jeopardy

Indian insurance giant LIC slumped in its market debut on Tuesday after the country’s biggest-ever IPO, opening 7% below the bid price.

Prime Minister Narendra Modi’s government has raised $2.7 billion by selling 3.5% of Life Insurance Corporation of India as his administration seeks to privatize state assets to fill a gaping budget gap.

But it was forced to cut the expected 5% supply after markets turned volatile following Russia’s invasion of Ukraine and Covid lockdowns in China.

The offer price of 949 rupees valued LIC at $77 billion, but it opened on the Mumbai Stock Exchange on Tuesday 7% lower. The share price fell 9.4%, before recovering slightly.

The muted debut could test new shareholders’ appetite for further IPOs of nationalized companies as Modi seeks to sell off state assets to fill a budget gap estimated at 16.6 trillion rupees (213.5 billions of dollars).

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The IPO saw enthusiastic participation from retail investors and was oversubscribed nearly three times during the six-day application period.

But foreign investors have pulled 1.71 trillion rupees ($22 billion) out of Indian stocks so far this year, according to stock market data, as tighter US monetary policy further rattled sentiment.

Synonym of life insurance

Founded in 1956 by the nationalization and merger of more than 240 companies, LIC was for decades synonymous with life insurance in post-independence India, until the arrival of private companies in 2000.

It continues to lead the pack with a 61% market share in India, with its army of 1.3 million “LIC agents” giving it considerable reach, especially in remote rural areas.

But LIC’s market share has continued to decline in the face of competition from sophisticated private insurers offering specialized products.

The company warned in its regulatory filing that “there can be no guarantee that our company will not lose further market share” to private companies.

The IPO follows a years-long effort by bankers and bureaucrats to assess the gigantic insurer and prepare it for listing.

LIC is also India’s largest asset manager, with 39.55 trillion rupees under management as of September 30, including large stakes in Indian blue chips such as Reliance and Infosys.

LIC’s property assets include sprawling offices in prime Indian urban locations, including a 15-story office in Chennai that was once the tallest building in the country.

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The company is also believed to have a large collection of rare and valuable works of art which includes paintings by MF Husain – known as India’s Pablo Picasso – although the value of these holdings is uncertain. not been made public.

AFP with an additional contribution from GVS News Desk