LIC IPO: Why is India’s largest insurance company getting listed?

Though the pricing is yet to be determined, analysts expect an IPO of Life Insurance Corporation of India.LIC) to be India’s largest ever, potentially earning the government over $10 billion.

Following the listing, which is expected to happen in March, LIC will be one of India’s largest publicly listed companies along with giants like Reliance and TCS.

– How big is the firm? ,

LIC was created in 1956 and became synonymous with life insurance in post-independence India until private firms were allowed entry in 2000.

The company accounts for two-thirds of the domestic life insurance market. It manages assets worth 36.7 trillion rupees ($491 billion), which is equivalent to about 16 percent of India’s GDP.

It has over 100,000 employees and one million insurance agents.

LIC’s real estate assets include large offices at prime locations in various Indian cities, including a 15-storey building in the southern city of Chennai and a distinctively curved head office in the heart of Mumbai’s financial district.

The firm is believed to have a large collection of rare and valuable artwork including paintings by MF Husain – known as the Pablo Picasso of India – although the value of these holdings has not been made public.

Why is the IPO happening? ,

Asia’s third-largest economy was already reeling from a prolonged recession before the start of the coronavirus pandemic. India has recorded its worst recession since independence due to the COVID-19 crisis.

Efforts to contain the spread of the virus such as stringent lockdowns created a significant budget deficit and pushed millions into unemployment and poverty.

LIC’s IPO Will boost the government’s efforts to garner much needed cash through privatizations that are running behind schedule.

The government has raised just Rs 120.3 billion this fiscal year through stake sale in various state-owned entities, well short of its target of Rs 780 billion.

Srinath Sreedharan, an independent market commentator, compared LIC to one of the “family jewels” of the Indian government.

– Is it an attractive investment? ,

LIC is a household name in India and has a strong hold on the life insurance market in the vast South Asian nation despite the entry of private players.

The company is offering its millions of policyholders an opportunity to invest in the IPO at a discount, promoting the offer through television commercials and full page newspaper advertisements.

Analysts expect retail investors, including many first-timers, to show a strong appetite to snatch stake in the coveted company.

But there are many uncertainties for investors. These include question marks on whether investment decisions can be made by LIC management without government intervention.

It is also unclear whether LIC will be able to maintain its market share with the increasing competition for younger consumers from more tech-savvy new entrants in the market.

This story has been published without modification in text from a wire agency feed. Only the title has been changed.