India slashes LIC's IPO fundraising goal in half to $3.9 billion: source

The state-owned insurance behemoth is now valued at about ₹6 trillion

New Delhi is halving its fundraising goal for Life Insurance Corporation of India's IPO to ₹300 billion ($3.9 billion), having had to cut its valuation estimates after feedback from investors, a government source said.

The drastic lowering of ambitions for the IPO - which would still be India's largest to date - is a setback for Prime Minister Narendra Modi's administration which had positioned the sale as the first and biggest of a wave of privatisations aimed at replenishing State coffers.

The state-owned insurance behemoth, also India's largest domestic financial investor, is now valued at about ₹6 trillion, according to the source, who declined to be identified as the IPO discussions were confidential.

Earlier government estimates had called for the insurer to be valued at around ₹17 trillion.

"Investors have become very risk averse in the last few months. After roadshows we realised there was no point in putting high valuation up front. Higher valuation can be discovered post the listing. After all the government will still hold nearly 95% of the issue," said the source.

The government plans to sell a stake of just over 5%, he said. The source added that fresh regulatory approval for the listing process will need to be sought but did not elaborate. The government had previously said it would sell a 5% stake. The Finance Ministry did not immediately respond to an email requesting comment.

The government had initially wanted to list LIC in the last financial year that ended March 31 but had to delay the sale after Russia's invasion of Ukraine triggered a market rout.