The Indian government has asked regulators for a swift review of Life Insurance Corporation’s(LIC) draft prospectus, two government sources with knowledge of the matter said – as it pulls out all the stops to have the country’s biggest IPO completed by the end of March.
Having pledged numerous times to list LIC by the end of the financial year, Prime Minister Narendra Modi’s administration is keen to avoid any loss of face and gain further momentum for its privatisation programme aimed at replenishing government coffers.
The finance ministry, SEBI and LIC did not respond to the requests for comment. For its part, LIC, which has nearly $500 billion in assets and commands more than 65% of India’s market. For life insurance policies, is also sparing no effort to ensure the IPO succeeds. Policyholders have also received a text message recommending they open an electronic stock holding account so they can participate in the IPO.
Selling 5% of LIC’s stock to gain that amount would be ideal. But the government is also willing to sell as much as 10%, government and banking sources have said. The government is talking with state-run banks about their participation in the IPO.
Complicating matters is the sheer size of the offering and the fact that India’s biggest IPO to date. A $2.5 billion offering from Paytm in November, was a spectacular flop on its debut. But investors will only get their first look at ’embedded value’ – a measure of future cash flow for life insurers – when the draft prospectus is submitted.
And while LIC’s first-half net profit soared to 14.4 billion rupees ($190 million) from 61 million rupees. In the same period a year earlier, much of that was due to a jump in investment income. While growth in net premiums after reinsurance was just 1%.