$8 billion LIC IPO would be India’s Aramco moment on March 11, 2022

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The much-awaited initial public offering (IPO) of India’s state-owned Life Insurance Corp (LIC) is around the corner, and if we believe on the recent media report the countdown has already begun to launch the biggest ever IPO in the history of India.

LIC IPO would be open for investors from 11th March, and the issue size would be a whopping $8 billion (Rs. 60,000 crores) – more than three times the biggest, yet the worst, IPO launch in India to date.

The launch of LIC IPO, however, could be delayed as LIC is yet to receive approval from the regulators. India largest insurance company submitted the draft IPO prospectus on Sunday. LIC is expected to receive the final approval by the end of February or the beginning of March.

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Only after the final approval is obtained, LIC will set the issue band, according to Reuters citing the sources who refused to provide spill more beans since the negotiations are confidential and at the final stage.

For now, the issuer is working hard to adhere to the timelines. failing to do that the launch date of LIC IPO could be pushed further to the second half of March.

LIC plans to sell 5% of the stake in order to raise around $8 billion. Currently, the government of India holds 100% stake of LIC divided by over 632.49 crore shares.

The successful launch of IPO would value LIC a $160 billion behemoth, putting it in the list of top 10 publicly listed Indian companies by the market capital. The list is currently dominated by Mukesh Ambani-led Reliance Industry.

The government is racing to finish the IPO before March 30th in order to reach its budget deficit goal of 6.4 percent from gross domestic production (GDP) that is dependent on raising about 60,000 crore rupees ($8.03 billion) from the IPO.

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Due to the heavy pressure and constant attacks from the opposition, the government of India has scaled down its privatization and divestment plans during the financial year ending on March 31, 2022, to Rs. 780 billion rupees, down from Rs. 1.75 trillion which was targeted earlier.

However, the target is still far away and nearly impossible without concluding a successful LIC IPO before March 31, 2022. It has so far been able to raise only Rs. 120 billion by selling stakes in state-run businesses as it has failed to execute its plans to privatize many state-run organizations, including Bharat Petroleum Corp, and two banks.

A successful LIC IPO would make the Life Insurance Corporation of India (LIC) the world’s third-largest insurer. It’s indeed going to be an India’s Aramco moment. The whopping $29.4 billion listing of the gulf oil giant is, so far, the world’s largest to date.

But the road to the mega IPO for LIC is not proving to be a cakewalk. Employees of LIC believe that the LIC IPO is a first step toward the complete privatization of India’s largest insurer which has employed nearly 1.2 lakh employees. They fear that the success of mega IPO would open a floodgate for the government to sell stakes to meet the fiscal deficit in years to come, or as and when it’s needed.

On Sunday, the All India Insurance Employees Association (AIIEA) staged a nationwide demonstration against the LIC IPO. The AIIEA has also announced that on March 28-29 all the LIC employees would go on strike. The LIC Employee’s Union has decided to support AIIEA, and all employees would go on strike on the launch day of the LIC IPO.

LIC’s IPO debut will test the strength of India’s capital markets as well as the global demand for its crown jewel, which is currently owned by the government.

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