Harried bankers race the clock in Mumbai’s sleek skyscrapers to appraise a company that hasn’t been valued in decades. In New Delhi, bureaucrats work through the night, despite power outages, to put together an initial public offering to rival any in Asia this year.
In the hinterlands, front-page newspaper advertisements inform over 250 million policyholders about the opportunity to own a piece of a company that is nearly as old as post-independence India.
For nearly two years, India has been preparing for a mammoth task: preparing India’s largest insurer, with nearly $500 billion in assets and a valuation of up to $203 billion, for what could be the country’s largest-ever stock listing. The public offering of Life Insurance Corporation of India, or LIC, has been dubbed “India’s Aramco moment” by some bankers. LIC’s debut, like the Gulf oil giant’s $29.4 billion IPO, will test the depth of the country’s capital markets and the global appetite for its state-owned crown jewel.
It’s far from certain that you’ll be successful. Consultants have been poring over reams of policy documents to come up with LIC’s embedded worth. A key valuation metric with about two months until the planned launch. Global investors, according to bankers, are concerned about the independence of an institution that is frequently called upon to save the teetering bank and state assets. Local investors are skeptical that the 65-year old company will be able to compete with up-and-comers. With a minimum dilution of 5%, LIC could raise as much as $10 billion from an IPO with a knock-out listing. That would make it the world’s third-largest insurance-related incident. More importantly, it would bolster Prime Minister Narendra Modi’s image as a market-oriented reformer ahead of crucial state elections, as well as help close a budget deficit.
country. The sheer size of LIC highlights the difficulties of listing something that is effectively a black box. Because the insurer only publishes its balance sheet once a year. There are no publicly available numbers to determine its embedded value. Which is calculated by combining the current value of future profits with the net value of assets. Executives from Milliman and Ernst & Young in charge of the valuation must sift through stacks of policies to account for variables such as mortalities, morbidities, lapses, and surrenders.
It’s difficult to make comparisons with peers. LIC, which was founded in 1956, is governed by a separate parliamentary act from the rest of the country’s insurance companies. According to a source familiar with the situation, LIC’s property holdings were internally valued at $5.8 billion in
According to people familiar with the situation, LIC plans to file a draught IPO prospectus in the last week of January. Which will include the embedded value as well as the number of shares for sale.
Last year was a banner year for IPOs in India, and LIC’s strong debut would only add to that momentum. Even with mixed results from some of the more hyped entries, such as Paytm, a digital payments service, and Zomato, a food delivery startup, listings raised around $18 billion in2021.
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