Huge stock market opening for India next month life insurance corporation (LIC) has battered shares of other insurance companies as investors trimmed their holdings to make room for the state-owned giant, fund managers and analysts.
The floatation, which will potentially raise $8 billion, will continue to drag LIC’s competitors for about a year and could spread to other sectors, he said.
According to Refinitiv data, the government on Sunday filed a draft letter with India’s market regulator to sell 5% of the company’s shares in what could be the world’s third-largest insurance IPO and the biggest Asian share sale this year. can be one of.
A fund manager on condition of anonymity said, “It is the biggest and you have to make room for it. “Historically, market leaders are the first to list. This is a rare moment when a big player is being listed too late.”
The 66-year-old, which dominates India’s insurance industry with over 280 million policies, is the fifth largest global insurer in terms of insurance premium collection in 2020, the latest year for which data are available. It had assets under management of 39.56 trillion rupees ($527 billion) as of September.
Vidya Bala, co-founder, PrimeInvestor, said, “For any fund manager, one player has a market share of more than 60%, which is a very natural rather than personally owning 10%-11% market share. There is aspiration.” Stock and mutual fund research firm.
Fund managers and Bala said fund managers have already started reducing their exposure to the three listed private life insurance companies.
Shares of ICICI Pru have lost 10.4% this year, while HDFC Life is down 9.7% and SBI Life is down 6.2%, while the blue-chip Nifty 50 index is down a modest 0.2% for the period .
Macquarie said in a report this week that LIC’s listing could dump the equivalent of around 60% of the free-float capitalization of the three insurers on the market, adding that the outlook for them remains challenging.
Two fund managers said if LIC’s valuation is attractive, the pressure could extend beyond insurance companies, putting pressure on consumer goods firms and some non-banking financial companies.
“When IPOs of such size come up, they suck the liquidity out of the system,” said a fund manager. “If there’s a room full of people at a party and an older man comes, you have to make room for that.”
This story has been published without modification in text from a wire agency feed. Only the title has been changed.
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