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Small-town retail investors with an emotional attachment to India’s oldest insurer and its long-loyal policyholders will likely prop up demand for the country’s largest-ever initial public offering, even as jittery markets forced the deal size to be slashed by more than half.

State-run Life Insurance Corporation of India is taking orders from retail investors between May 4 through May 9 in a listing that could, at the new reduced price range, raise up to $2.7 billion. Russia’s invasion of Ukraine and rising U.S. interest rates are putting foreign funds off emerging market stocks, but investment advisers say the mammoth insurer’s float will likely be lapped up by mom-and-pop investors.

“There are IPOs and then there is the LIC share sale. Both are entirely different things,” said Pallav Bagaria, a director at the Pune-headquartered Sapient Wealth Advisors & Brokers Ltd. “The insurer has had an association with an entire generation of people, and they want to buy LIC because they feel it’s their company.”

Founded in the late 1950s, LIC was the country’s only insurer until the government opened up the market to private competition in 2000. It remains India’s largest insurer with a sales agent in almost every neighborhood in even the smallest towns.

Many people who grew up in the 1960s have an “emotional engagement” with LIC, which they view as synonymous with insurance, said Vikaas Sachdeva, chief executive officer at Emkay Investment Managers Ltd.

“There is a fair amount of buzz around the issue of shares given it is a phenomenal brand that has been around for years,” said Sachdeva, who said he has been receiving a barrage of phone calls from his father’s friends and relatives asking about the IPO.

He said the government’s decision to scale back the float by making shares cheaper and the deal size smaller has only made it “more compelling.”

“The low valuation multiple of India’s largest state-owned life insurer, Life Insurance Corporation, and a reduced offer size could allow its listing to attract decent bids… The lower valuation vs. smaller listed peers is within our expectation due to LIC’s lagging new-business margin, less diversified products and fewer sales channels.”

— Steven Lam, analyst, and Nitin Chanduka, strategist (Bloomberg Intelligence)

India’s government is selling 221.4 million LIC shares at between 902 rupees and 949 rupees each, which would raise as much as 210 billion rupees at the top end of the range — far below the 500 billion rupees target earlier.

Retail investors will be alloted 35% of the total shares in the offer, and given a discount of 45 rupees from the IPO price; 10% of the float, meanwhile, has been earmarked for LIC’s policyholders, who will receive a 60-rupee discount on each share. The minimum bid lot size is 15 shares, which means a retail investor would have to shell out at least 13,560 rupees ($177) for a stake. Policy holders have to spend at least 13,335 rupees.

“This investment is like insurance. We are sure that we are not going to get trapped in a wrong company or some fly-by-night operator,” said 74-year old Ravi Gogia, a former employee of

., who plans to bid for LIC’s shares in the IPO.

Growth Headwinds
Still, not everyone is a fan, with some investors wary of buying into a slow-growing insurer at a time when India’s IPO market is struggling.

LIC IPOBloomberg

“I think LIC is too huge of a company to post strong year-on-year revenue growth from here on,” said Aditya Chawan, a 34-year-old consultant with a global technology firm in India, who has been an investor in stocks for five years.

LIC has a 60% market share of India’s 24-company-strong life insurance market, but its hold is shrinking as private players like HDFC Life Insurance Co. Ltd. and SBI Life Insurance Co. Ltd. expand. The private sector has been on an aggressive expansion spree during the pandemic, growing new individual policy premiums while LIC struggles.

“The long-term story of these private life insurers — that they are sustainably gaining market share from LIC — remains unchanged,” Emkay Global Financial Services Ltd. analyst Avinash Singh said.

It doesn’t help, said some investors, that LIC hasn’t declared a clear dividend policy, nor that the IPO market is struggling. The S&P BSE IPO Index, a gauge of newly listed shares, has fallen 15% this year after nearly tripling in the previous three. Mobile payments company

— India’s biggest IPO until LIC’s — is the index’s worst performer, down 70% since its highly anticipated float in November.

In the meantime, LIC and the country’s large brokers continue to build up momentum for the share sale. LIC has been advertising the float in newspapers since the start of the year, and is also offering its 286 million policyholders with easy access to brokerage accounts to buy into the float.

Axis Securities Ltd. has opened around 45,000 accounts for LIC’s prospective IPO investors in the past month, while ICICI Securities Ltd. is luring potential new investors to the float with offers like free brokerage accounts as well as access to its online training courses for trading. ICICI Securities Chief Executive Vijay Chandok said the brokerage has fine-tuned its IPO application process and made it more user-friendly, with first-time subscribers in mind.

–With assistance from Adrija Chatterjee.

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