A Life Insurance Corporation office in India. Photo: Supplied

India’s largest insurer has completed the paperwork to enter capital markets and the initial share sale is expected to be the biggest public offering in the country’s stock market history.

State-owned Life Insurance Corporation on Sunday filed draft papers with market watchdog the Securities and Exchange Board of India for the sale of a 5% stake for an estimated 630 billion rupees (US$8.36 billion).

The insurer will sell 316 million shares next month and employees and policyholders will be able to buy them at a discount over the floor price.

According to its draft red herring prospectus, Life Insurance Corporation’s embedded value, as assessed by actuarial firm Milliman Advisors, was about 5.4 trillion rupees as of September 30, 2021. The embedded value is the sum of the net asset value and the present value of future profits of a life insurance company.

The prospectus has not disclosed the market valuation of the insurance behemoth, but according to industry standards, it would be about three times the embedded value, or about 16 trillion rupees.

This IPO is solely an offer for sale by the Indian government, with no fresh issue of shares by Life Insurance Corporation. The government holds a 100% stake in the insurer. The face value of shares is Rs 10 apiece.

Once listed, Life Insurance Corporation’s market valuation would be comparable to other top Indian companies such as Reliance Industries and Tata Consultancy Services.

The largest amount raised from capital markets, so far, is that of digital wallet startup Paytm in 2021 (183 billion rupees), followed by Coal India in 2010 (155 billion rupees).

Proceeds from the Life Insurance Corporation share sale will be crucial to meet the revised disinvestment target of 780 billion rupees in the current fiscal. So far, the Indian government has raised 120 billion rupees this fiscal year through the sale of Air India and stake sales in central public sector enterprises.

The government has appointed 10 merchant bankers, including Kotak Mahindra Capital, Goldman Sachs (India) Securities Pvt Ltd, Citigroup Global Markets India Pvt Ltd and Nomura Financial Advisory and Securities (India) Pvt Ltd, to manage the mega share sale.

The federal government is also considering allowing foreign investors to pick up a stake in Life Insurance Corporation. For this, the government will have to tweak foreign direct investment policy rules to allow foreign investors to buy shares in the insurer.