Subsequent month’s mammoth inventory market debut for India’s Life Insurance coverage Company (LIC) has battered shares in different insurers as buyers trim their holdings to make room for the state-owned large, fund managers and analysts mentioned.
The flotation, probably elevating $8 billion, possible will proceed to pull on LIC’s opponents for a few yr and will unfold to different sectors, they mentioned.
The federal government filed draft papers on Sunday with India’s market regulator to promote 5% of the corporate’s shares in what might be the world’s third-biggest insurance coverage IPO ever and certainly one of this yr’s largest Asian share gross sales, in accordance with Refinitiv knowledge.
“That is the largest one and it’s a must to make house for this,” mentioned a fund supervisor who requested to not be named. “Traditionally, market leaders are the primary ones that checklist. It is a uncommon second when a big participant is being listed very late.”
The 66-year-old firm, dominating India’s insurance coverage business with greater than 280 million insurance policies, is the fifth-biggest world insurer when it comes to insurance coverage premium assortment in 2020, the newest yr for which statistics can be found. It had 39.56 trillion rupees ($527 billion) of belongings below administration as of September.
“For any fund supervisor, having a participant that owns over 60% of the market share as an alternative of individually proudly owning those who have 10%-11% market share is a really pure aspiration,” mentioned Vidya Bala, co-founder of PrimeInvestor, a shares and mutual funds analysis agency.
Fund managers have already began lowering their publicity to the three listed non-public life insurers, the fund supervisor and Bala mentioned.
Shares in ICICI Pru have dropped 10.4% this yr, whereas HDFC Life is down 9.7% and SBI Life 6.2%, in contrast with a marginal 0.2% decline within the blue-chip Nifty 50 index for the interval.
LIC’s itemizing might dump the equal of practically 60% of the three insurers’ free-float capitalisation in the marketplace, Macquarie mentioned in a report this week, including that the outlook for them stays difficult.
If LIC’s valuation is engaging, the strain might unfold past insurers, weighing on shopper items corporations and a few non-banking monetary firms, two fund managers mentioned.
“When IPOs of this large dimension come, they suck out the liquidity from the system,” one of many fund managers mentioned. “If there’s room full of individuals at a celebration and an enormous man is available in, it’s a must to create house for him.”
This story has been revealed from a wire company feed with out modifications to the textual content. Solely the headline has been modified.
Supply: Live Mint