LIC’s IPO: What impact will it leave on the Indian insurance industry?
IPO k saath, IPO k baad bhi LIC
Shares in rival insurers have been pummelling ahead of India’s Life Insurance Corporation (LICmassive )’s stock market debut next month, as investors decrease their holdings to make place for the state-owned giant, according to fund managers and experts.
According to analysts, the IPO, which might raise $8 billion, is expected to drag on LIC’s competitors for nearly a year and expand to other industries.
According to Refinitiv data, the government filed draught documents with India’s market regulator on Sunday to sell 5% of the company’s shares in what may be the world’s third-largest insurance IPO ever and one of the year’s most significant Asian share sales.
“This is the largest one, and you have to create room for it,” a fund manager said.
“Market leaders have always been at the top of the list. So it’s an unusual occurrence when a major player is mentioned so late.”
With more than 280 million policies, the 66-year-old corporation is the fifth-largest worldwide insurer in terms of insurance premium collection in 2020, the most recent year for which figures are available. As of September, it managed 39.56 trillion rupees ($527 billion).
ICICI Prudential has lost 10.4% this year, while HDFC Life has lost 9.7% and SBI Life has lost 6.2 percent, compared to a negligible 0.2 percent decrease in the blue-chip Nifty 50 index.
Macquarie warned in a study this week that LIC’s listing may dump roughly 60% of the three insurers’ free-float capitalization on the market and that the outlook for them remains bleak.
If LIC’s valuation is appealing, two fund managers believe the pressure will go beyond insurers, hitting consumer goods industries and specific non-banking financial organizations.
“When major IPOs come along, they drain the liquidity out of the system,” one of the fund managers explained. “When there’s a crowded room during a party, and a huge guy walks in, you have to make way for him.”
It would be interesting to see how many additional complications LIC’s initial public offering (IPO) will cause competitors.
