The Life Insurance Corporation of India (LIC) has secured Singapore’s Temasek Holdings and the Abu Dhabi Investment Authority as anchor investors for what is expected to be the nation’s biggest-ever IPO, according to a person familiar with the matter.
Goldman Sachs, Nomura Holdings, and a Singapore pension fund have also committed to participate in the IPO as anchor investors, the person said.
The Indian government plans to divest 10% of the state-owned insurance giant, which controls more than 60% of India’s life insurance market and it has assets of more than $500 billion under management, via the IPO. LIC, the Securities and Exchange Board of India and the Finance Ministry are working around the clock to launch the IPO before the fiscal year ends in March, the person said.
“The Abu Dhabi Investment Authority, Singapore’s global investment company, Temasek, as well as a few Canada-based pension funds have also agreed to invest in the IPO,” said the person. Singapore’s sovereign wealth fund GIC is also likely to invest in the offering, said another person close to the offering.
Neither Temasek nor ADIA responded to requests for comment from Asia Financial.
The government is banking on the IPO to help meet its 2021-22 divestment target of over $423 billion. The insurance behemoth has been valued at between $55 billion to $63 billion by the government, which aims to raise at least $150 billion through the offering, the person said.
Insurers are often valued using so-called embedded value, which combines the present value of future profits of a firm with the net asset value of its capital and surplus. Such a metric values LIC at about three times the $63 billion at the top end of the government’s range and it aims to raise an amount roughly equivalent to that from the IPO, according to reports in local media.
“This means that the IPO would be priced steeply,” said another person.
Brand Finance values the LIC brand at $8.66 billion and it’s ranked the second most valuable brand in India, behind the Tata Group. LIC is also the largest asset manager in the country with $493 billion of assets under management (AUM) as of March 31 last year, more than Hong Kong’s gross domestic product.
LIC is also the single-largest holder of stocks in the country, with a portfolio equal to about 4% of the total market cap of companies listed on the National Stock Exchange, according to local media reports.
An army of investment bankers are working on the IPO. They include Goldman Sachs, Citigroup Global Markets India, Nomura Financial Advisory and Securities India, SBI Capital Market, JM Financial, Axis Capital, BofA Securities, JP Morgan India, ICICI Securities, and Kotak Mahindra Capital, according to local media.
“Given its size, the government is also banking on global anchor investors to lift the IPO through,” said the person.
SEBI RULE CHANGE
Investment bankers say they have been given a deadline of 31 March for the IPO to beat a SEBI rule that will come into effect from April 1st. It says that for all new offerings from that date the present 30-day lock-in period will continue for 50% of the part allocated to anchor investors, and a 90-day lock-in period will apply for the remaining half.
“This has put added pressure on us to get the IPO done by March-end,” said the other person.
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