• Subscribe
  • Log In
  • Home
  • Daily Diary
  • Asset Class
    • U.S. Equity
    • Fixed Income
    • Global Equity
    • Commodities
    • Currencies
  • Sector
    • Basic Materials
    • Consumer Discretionary
    • Consumer Staples
    • Energy
    • Financial Services
    • Healthcare
    • Industrials
    • Real Estate
    • Technology
    • Telecom Services
    • Transportation
    • Utilities
  • Latest
    • Articles
    • Video
    • Columnist Conversations
    • Best Ideas
    • Stock of the Day
  • Street Notes
  • Authors
    • Bruce Kamich
    • Doug Kass
    • Jim "Rev Shark" DePorre
    • Helene Meisler
    • Jonathan Heller
    • - See All -
  • Options
  • RMPIA
  • Switch Product
    • Action Alerts PLUS
    • Quant Ratings
    • Real Money
    • Real Money Pro
    • Retirement
    • Stocks Under $10
    • TheStreet
    • Top Stocks
    • Trifecta Stocks
  1. Home
  2. / Investing
  3. / Global Equity

India Lays Plans to Take Government Insurer Public Via Largest-Ever IPO

The Life Insurance Corporation of India long held a monopoly on life insurance but will sell shares as part of the government's divestment plans.
By ALEX FREW MCMILLAN
Feb 11, 2022 | 07:30 AM EST
Stocks quotes in this article: C, GS

The board of the Life Insurance Corporation of India (LIC) is due to meet here on Friday to discuss plans for an initial public offering, which almost certainly would be the largest in India's history.

Indian Prime Minister Narendra Modi has pledged many times to launch the IPO before the end of this fiscal year on March 31, but time is now running tight. The LIC, India's largest insurance company, would therefore likely need to file a prospectus this month to hit that timeframe.

The LIC is owned by the Indian Ministry of Finance. It was formed in 1956 when the government nationalized the life insurance industry following the collapse of a number of private insurers. At that time a total of 154 Indian insurers were combined into one entity, with 16 overseas operators in Indian life insurance and 75 provident societies.

The Indian government then privatized the entire insurance industry in 1973, only allowing private companies to offer coverage once again in 2000. LIC had a monopoly on life insurance alongside another state-owned operator, General Insurance Corp., which the government started operating in 1973.

The government has requested an expedited approvals process for an LIC floatation with the Securities and Exchange Board of India. The stock watchdog normally requires around 75 days to vet an IPO, which would see the March deadline slip. The government hopes the board can process the prospectus and offering in three weeks.

The Indian government is looking to privatization of government-owned entities as a big way of repairing a budget deficit. But in announcing the budget at the start of this month, it slashed its target for the privatization program for this fiscal year to 780 billion rupees (US$10.4 billion), down from 1.75 trillion rupees (US$23.2 billion). It also set a more modest target for next year of 650 billion rupees (US$8.6 billion).

For this year, the government intended to raise as much as 900 billion rupees (US$12.0 billion) by selling shares in the insurer. Because it so far has raised around 120 billion rupees (US$1.6 billion) through the sale of stakes in other companies, the reduction in the budget target for privatizations led some market watchers to predict that the LIC issuance will be downsized.

The government played down this possibility. It likely is looking to sell a stake of 5% to 10% in the insurer to the public. LIC is not expected to issue new shares in the offering, so the entire float would be being sold by the government.

The government must maintain a majority 51% stake in LIC by law, but it could sell off as much as 25% of its holding within the next five years, officials indicate.

After decades of failed attempts, the privatization of national carrier Air India was finally completed last month, with the Tata Group buying the airline for US$2.4 billion. Tata actually founded Air India in 1932 but the government took it over in 1953. The conglomerate will now need to turn the carrier around from persistent losses.

The LIC has a massive network in India, with 2,048 branches and another 1,381 satellite offices. It still dominates the life insurance market with a 65% market share thanks to its long-running monopoly on coverage, but has been losing ground to private competitors.

It last reported total assets of 40.2 trillion rupees (US$534 billion). For the six months through September, it generated 14.3 billion rupees (US$190.8 million) in after-tax profit and issued 18.6 billion rupees in premiums, although profits recently have been driven by the direction of investment returns.

The government has appointed 10 investment banks to work on the pending privatization, including Citigroup (C) and Goldman Sachs (GS) .

Paytm and its parent One 97 Communications (NSE:PAYTM) hold the record for the largest Indian IPO, at US$2.5 billion. It does not help that the e-payments company's shares are trading 57% below their offer price of 2,150 rupees.

Get an email alert each time I write an article for Real Money. Click the "+Follow" next to my byline to this article.

At the time of publication, McMillan had no positions in the stocks mentioned.

TAGS: IPOs | Investing | Stocks | Financial Services | India | Real Money | Global Equity

More from Global Equity

Hong Kong Marks 25 Years Since Handover With New Version of History

Alex Frew McMillan
Jul 1, 2022 7:47 AM EDT

Just don't call it a handover - Chinese President Xi Jinping has been on a whistle-stop tour of Hong Kong, which we're now told never belonged to the British.

Naspers to Unlock Its Own Value By Selling Down $129B Tencent Stake

Alex Frew McMillan
Jun 29, 2022 6:32 AM EDT

Naspers and its investment-holding company Prosus will sell down their Tencent stake and buy their own shares, with both companies trading at big discounts to NAV.

India's Equity Market Sees Foreign Investors Sell at Record Rate

Alex Frew McMillan
Jun 27, 2022 8:00 AM EDT

After two years of strong buying, international investors are now dumping Indian stocks as they look to capture gains.

Chinese Tech Company Ximalaya Pulls Planned IPO Yet Again

Alex Frew McMillan
Jun 24, 2022 6:30 AM EDT

Poor market conditions and the uncertain status of Chinese tech listings cause the podcast market leader to put off its Hong Kong IPO.

Why It Costs $1B Per Year to Go Up Against Indonesia's GoTo Group

Alex Frew McMillan
Jun 22, 2022 6:30 AM EDT

It's not often you find a tech stock with defensive characteristics and a strong upside, but GoTo offers both.

Real Money's message boards are strictly for the open exchange of investment ideas among registered users. Any discussions or subjects off that topic or that do not promote this goal will be removed at the discretion of the site's moderators. Abusive, insensitive or threatening comments will not be tolerated and will be deleted. Thank you for your cooperation. If you have questions, please contact us here.

Email

CANCEL
SUBMIT

Email sent

Thank you, your email to has been sent successfully.

DONE

Oops!

We're sorry. There was a problem trying to send your email to .
Please contact customer support to let us know.

DONE

Please Join or Log In to Email Our Authors.

Email Real Money's Wall Street Pros for further analysis and insight

Already a Subscriber? Login

Columnist Conversation

  • 07:59 PM EDT PAUL PRICE

    Very good quarterly numbers from Bassett Furniture (BSET)

    Bassett Furniture (BSET) blew right through analys...
  • 04:41 PM EDT PAUL PRICE

    First Half Results - Putrid Second Half Results - Likely to Be Much Better

    It's great that we're done with June. 2022 marked...
  • 04:51 PM EDT PAUL PRICE

    We Should Be in for Better Starting Soon

    Window dressing Thursday, the last day of the...
  • See More

COLUMNIST TWEETS

  • A Twitter List by realmoney
About Privacy Terms of Use

© 1996-2022 TheStreet, Inc., 225 Liberty Street, 27th Floor, New York, NY 10281

Need Help? Contact Customer Service

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data & Company fundamental data provided by FactSet. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by FactSet Digital Solutions Group.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

FactSet calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.

Compare Brokers

Please Join or Log In to manage and receive alerts.

Follow Real Money's Wall Street Pros to receive real-time investing alerts

Already a Subscriber? Login