Five reasons why the LIC IPO could be India's Aramco moment

When Aramco came out with the world's biggest IPO, the Saudi govt raised $25.6 billion by diluting just 1.5%, valuing the company at $1.7 trn; Indian govt plans to divest 5% for $8.7 bn in LIC

In 2019, Saudi Arabian Oil Co (Aramco) came out with the world’s biggest Initial Public Offering (IPO). The Saudi government raised $25.6 billion by diluting just 1.5 per cent stake, valuing the company at $1.7 trillion. The Indian government plans to divest 5 per cent equity for Rs 65,000 crore ($8.7 billion) in the insurance behemoth Life Insurance Corporation (LIC). Here are a few charts which explain why LIC’s IPO is touted as India’s Aramco moment:

Issue size dwarfs amount mobilised during full year
 

At Rs 65,000 crore, the IPO size is higher than the cumulative amount raised during any calendar year barring 2017 and 2021, shows data provided by Prime Database. In 2017, 36 IPOs had raised a combined Rs 67,147 crore and last year 63 issues raised Rs 1.19 trillion.

Best years for IPOs	Amt raised (Rs cr)
2021	118722.03
2017	67147.44
2010	37534.65
2007	34179.11
2017	30959.07

Bigger than FPI, DII, Retail flows into IPOs
 

LIC is looking to mobilise more than what foreign portfolio investors (FPIs), domestic institutional investors (DIIs) and retail cumulatively invested in all IPOs of 2021.

Amount invested IPOs in 2021	FPI	DII	Retail
in $ bn	7.4	3.4	5

Equity holdings of over Rs 9.5 trillion
 

At end of December 2021, the value of LIC’s investment in listed companies stood at Rs 9.53 trillion. As per UBS, LIC is the largest domestic investor, accounting for nearly a third of all DII holdings.

Break up of DII equity holdings	Equity AUM ($ bn)
MFs	253
LIC	130
Insurers ex-LIC	70

Govt’s largest holding
 

After LIC’s listing, the insurer will account for 43 per cent stake of government holdings in listed companies. Share of PSUs that are currently listed will shrink to 54 per cent and the share government’s holding in non-PSUs will shrink to 3 per cent.

Govt's stake in listed cos	Share (%)
LIC	43
Other PSUs	54
Other listed firms	3

To break into the top-three club
 

Post listing, the insurer will be among the top three most-valued stocks in the country after Reliance Industries and Tata Consultancy Services (TCS). If the government prices the issue aggressively or if LIC’s shares rally post listing, it can even take the top slot, experts say.

Top three by mcap	Mcap ($ bn)
RIL	214
TCS	182
LIC	172
HDFC Bank	112
Infosys	96