CORRECTED-UPDATE 1-India raises $1.5 bln in IPO of reinsurer GIC Re

(Corrects headline and 1st paragraph to say the Indian govt raised $1.5 bln in GIC Re’s IPO, not $1.75 bln; clarifies in 8th paragraph total IPO size is $1.75 bln; corrects 4th paragraph to say total IPO raised this year is about $8 billion, not more than $6 billion)

* Top 10 IPOs in India:

* India eyes record IPO year:

MUMBAI, Oct 13 (Reuters) - The Indian government raised about 98 billion rupees ($1.5 billion) on Friday by selling some of its shares in General Insurance Corp of India (GIC Re), the nation’s top reinsurer, in the country’s biggest listing in seven years.

The funds could be critical at a time when the government is looking to boost spending to help counter the slowest economic growth in more than three years, but has been constrained in part by lower-than-expected tax collections.

The government is aiming to raise 725 billion rupees by selling off some of its stakes in state-run companies in the year to March, including through the initial public offering (IPO) of GIC Re, which was set to close later on Friday having already attracted 1.35 times the number of shares on offer.

GIC Re’s IPO brings the total money raised through IPOs this year to about $8 billion, not far from the record $8.65 billion in 2007, amid a market rally that has sent indexes to record highs. The NSE index closed up 0.7 percent after hitting its latest all-time high earlier in the session.

GIC Re, which had a 60 percent share in India’s reinsurance market according to Crisil Research, is expected to benefit from growing premiums in India, which has relatively lower insurance penetration. The company is also expanding internationally.

“We are not expecting any fancy listing gains on GIC Re just like in other recent insurance company IPOs, but the company is a good long-term buy,” said Krishna Rana, an analyst with brokerage Sushil Finance.

“Insurance is a relatively new sector and the knowledge about this sector is still quite low, so retail interest in these IPOs also has been lower,” she added.

The government, which currently fully owns the reinsurer, was selling 107.5 million shares in the IPO, while the company was selling 17.2 million new shares, for a total IPO size of 113.7 billion rupees ($1.75 billion).

The total offer of 124.7 million shares constitutes 14.2 percent of the post-offer paid up share capital.

Crisil estimates reinsurance premiums in India will grow at an average annual rate of 11-14 percent over five years to reach 700 billion rupees by March 2022.

Most analysts had recommended subscribing to the IPO, citing its reasonable valuations, although recent lacklustre listings by two big insurance companies had dampened sentiment.

GIC Re is set to debut in markets on Oct. 25.

Citi, Axis Capital, Deutsche Bank, HSBC and Kotak were the banks managing the GIC Re IPO, which was the biggest since Coal India’s 2010 share sale that raised 155 billion rupees. ($1 = 64.9100 Indian rupees)

Reporting by Devidutta Tripathy and Swati Bhat; Additional reporting by Gaurav Dogra in Bengaluru; Editing by MarkPotter