India halves fundraising target to $3.9bn for Life Insurance Corp IPO: source

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New Delhi halves fundraising target for Life Insurance Corp IPO of India at 300 billion rupees ($3.9 billion), after having to cut its valuation estimates after investor comments, a government source said.

The drastic drop in ambitions for the IPO – which would still be India’s biggest to date – is a setback for Prime Minister Narendra Modi’s administration which had positioned the sale as the first and most important of a wave of privatizations aimed at bailing out the state coffers.

The state-owned insurance giant, also India’s largest domestic financial investor, is now valued at around 6 trillion rupees, according to the source, who declined to be identified as talks over the IPO were confidential.

Earlier government estimates had called for the insurer to be valued at around 17 trillion rupees.

“Investors have become very risk averse over the past few months. After the roadshows, we realized that it was useless to put forward a high valuation. A higher rating can be discovered after registration. After all, the government will still own nearly 95% of the show,” the source said.

The government plans to sell a stake of just over 5%, he said. The source added that further regulatory approval for the listing process will need to be sought, but did not elaborate. The government had previously announced that it would sell a 5% stake.

The IPO is expected to launch in the first week of May, investment banking sources said.

The finance ministry did not immediately respond to an email seeking comment.

The government originally wanted to list LIC in the last financial year that ended March 31, but had to delay the sale after Russia’s invasion of Ukraine triggered a market rout.

The 66-year-old company dominates the insurance industry in India with over 280 million policies. It was the world’s fifth-largest insurer in terms of insurance premium collection in 2020, the latest year for which statistics are available.

Investors fear that LIC’s investment decisions, including those in loss-making state enterprises, will be influenced by government demands.

($1 = 76.3510 Indian rupees)

(Reporting by Aftab Ahmed; additional reporting by Nupur Anand and Scott Murdoch; editing by Edwina Gibbs)

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