Indian Prime Minister Narendra Modi’s government surprised investors by saying that it would sell part of its stake in state-run behemoth Life Insurance Corp (LIC) of India to meet its record asset-sale target.
Investors likened the proposal to Saudi Aramco, which in December last year raised about US$25 billion in the world’s biggest-ever initial public offering (IPO), and overtook Microsoft Corp and Apple Inc as the most valuable listed company.
India aims to sell the stake in the year starting April 1, Indian Department of Investment and Public Asset Management Secretary Tuhin Kanta Pandey said in an interview.
The “LIC IPO is akin to the Saudi Aramco listing for our capital markets,” said Vijay Bhushan, president of the Association of National Exchanges Members of India. “It will be IPO of the decade.”
Now comes the hard part. LIC, whose total assets of 31 trillion rupees (US$433.57 billion) exceed that of all Indian mutual funds combined, was set up under a special act in 1956. The government would have to amend the law, a process that could delay the sale beyond March next year and keep it from meeting its record divestment target of 2.1 trillion rupees.
LIC’s sheer size also makes it hard for the government to sell a big chunk of its holding. Nervousness was palpable on Saturday as shares of private insurers — SBI Life Insurance, General Insurance Corp of India, HDFC Life Insurance Co and ICICI Prudential Life Insurance Co — slumped 6 to 14 percent in a special trading session after the proposal was announced.
“It will become India’s biggest company by market value the day of the listing, given it is the largest company by assets under management,” said Kajal Gandhi, an analyst at ICICI Securities Ltd in Mumbai. “Even a 10 percent dilution will be difficult for the market to absorb it in one go.”
The sale could fetch the government 850 billion rupees to 900 billion rupees if the IPO is done this year, Credit Suisse analysts led by Neelkanth Mishra wrote in a note.
Insurance stocks have been star performers in recent years. SBI Life was among four insurers whose IPOs raised more than US$1 billion in 2017, data compiled by Bloomberg showed.
LIC has in the past been used as an investor of last resort to support the markets by buying shares of state-run companies.
It owns double-digit stakes in several publicly traded firms, including Bharat Heavy Electricals Ltd and Larsen & Toubro Ltd, that are collectively worth more than US$80 billion, data compiled by Bloomberg showed.
Last year, the insurer bailed out IDBI Bank by buying a 51 percent stake in it.
The proposal is already facing opposition from the insurer’s staff, the Press Trust of India reported, citing the spokesman of an employees’ union, who said that the sale is “against national interest.”
However, taking LIC public would help instill “discipline” and help unlock value, Indian Minister of Finance and Corporate Affairs Nirmala Sitharaman said in her budget speech, without providing details or a timeline for the sale.
“It is good for India and the market as well, because once this listing happens there will be greater transparency as far as LIC’s affairs are concerned,” said Joseph Thomas, head of research at Emkay Wealth Management. “Insurance and LIC have been synonymous in our common parlance.”
BUSINESS UPDATE: The iPhone assembler said operations outlook is expected to show quarter-on-quarter and year-on-year growth for the second quarter Hon Hai Precision Industry Co (鴻海精密) yesterday reported strong growth in sales last month, potentially raising expectations for iPhone sales while artificial intelligence (AI)-related business booms. The company, which assembles the majority of Apple Inc’s smartphones, reported a 19.03 percent rise in monthly sales to NT$510.9 billion (US$15.78 billion), from NT$429.22 billion in the same period last year. On a monthly basis, sales rose 14.16 percent, it said. The company in a statement said that last month’s revenue was a record-breaking April performance. Hon Hai, known also as Foxconn Technology Group (富士康科技集團), assembles most iPhones, but the company is diversifying its business to
Apple Inc has been developing a homegrown chip to run artificial intelligence (AI) tools in data centers, although it is unclear if the semiconductor would ever be deployed, the Wall Street Journal reported on Monday. The effort would build on Apple’s previous efforts to make in-house chips, which run in its iPhones, Macs and other devices, according to the Journal, which cited unidentified people familiar with the matter. The server project is code-named ACDC (Apple Chips in Data Center) within the company, aiming to utilize Apple’s expertise in chip design for the company’s server infrastructure, the newspaper said. While this initiative has been
GlobalWafers Co (環球晶圓), the world’s No. 3 silicon wafer supplier, yesterday said that revenue would rise moderately in the second half of this year, driven primarily by robust demand for advanced wafers used in high-bandwidth memory (HBM) chips, a key component of artificial intelligence (AI) technology. “The first quarter is the lowest point of this cycle. The second half will be better than the first for the whole semiconductor industry and for GlobalWafers,” chairwoman Doris Hsu (徐秀蘭) said during an online investors’ conference. “HBM would definitely be the key growth driver in the second half,” Hsu said. “That is our big hope
The consumer price index (CPI) last month eased to 1.95 percent, below the central bank’s 2 percent target, as food and entertainment cost increases decelerated, helped by stable egg prices, the Directorate-General of Budget, Accounting and Statistics (DGBAS) said yesterday. The slowdown bucked predictions by policymakers and academics that inflationary pressures would build up following double-digit electricity rate hikes on April 1. “The latest CPI data came after the cost of eating out and rent grew moderately amid mixed international raw material prices,” DGBAS official Tsao Chih-hung (曹志弘) told a news conference in Taipei. The central bank in March raised interest rates by