IPOs don't get much larger than the $12 billion offering from Dai-ichi Mutual Life Insurance Co, Japan's second-biggest insurer, and optimism is running high that it will kickstart the country's moribund IPO market.

The IPO, potentially the world's largest after credit card firm Visa Inc's $19.7 billion offering in 2008, is so big that Tokyo's stock exchange TSE.UL has amended trading rules for the shares on their debut even after its launch of a new turbo-charged trading system.

The offering will be welcome relief for Japan's IPO market, with Dai-ichi Life seeking to raise almost 19 times more money than the combined total of the 20 firms to debut last year, when the market dwindled to a near 20-year low of just 57.5 billion yen ($645 million) worth of shares.

Dai-ichi Life will definitely be a hot issue and the shares will be heavily subscribed. But we cannot take it for granted that this will happen at every IPO, said a senior investment banker at a foreign brokerage in Tokyo who could not be named as he was not allowed to speak publicly about specific deals.

His bank is not involved directly in the deal.

Dai-ichi Life, which ranks behind only unlisted Nippon Life Insurance, plans to list on April 1 after completing the process of demutualization.

Its offering comes as once-booming Shanghai and Hong Kong are hit by IPO fatigue, share prices of recent big IPOs such as UC RUSAL fall well below their offer levels and offerings are being delayed due to market softness.

Japanese IPOs slumped 58 percent last year to their lowest since 1992, but even before the global financial rout, appetite for market debuts in Tokyo, especially small-cap stocks, had shrunk since Internet firm Livedoor was hit by an accounting scandal in 2006.

Initial subscription demand for Dai-ichi shares is expected to be solid, with the stock too big for most to ignore.

It will have a certain weighting in stock indexes so investors who track those must buy it, said Hitoshi Yamamoto, CEO at Fortis Asset Management, adding that defensive stocks like insurers are currently more in favor than other financial stocks.

Institutional investor interest in Dai-ichi's offer is also likely to rise now that a $10-$20 billion Hong Kong IPO by American International Group's Asian insurance arm, AIA, has been dropped due to the unit's planned $35.5 billion sale to British insurer Prudential Plc.

The Dai-ichi offering will bring a lot of first-time retail shareholders to the market as policyholders will receive shares -- this mass influx has prompted the Tokyo bourse to halt Dai-ichi's shares on its first day once the first traded price has been set.

If its share price falls, we'll have some disappointed retail investors, but if it rises this would be a good experience for them and good for the market at a time when the number of retail investors is falling, said Sadakazu Osaki, head of research at Nomura Research Institute's Center for Knowledge Exchange and Creation.

Analysts have said Dai-ichi Life's share price is expected to be relatively stable and investors would be those seeking dividend rather than a quick profit from the share price.

Dai-ichi is offering 7 million shares at 150,000 yen each. With 10 million shares outstanding, it would be valued at 1.5 trillion yen.

The life insurer has the liberty to price its shares cheaper than rivals as it does not have shareholders who typically pressure issuers to sell IPO shares for as much as possible, the investment banker said. Dai-ichi is a mutual company, and all sale proceeds go to policyholders.

But, while its pricing looks cheap compared with numbers bandied about before the financial crisis, analysts say it does not necessarily outshine rival T&D Holdings and Sony Financial, parent of Sony Life Insurance, considering Dai-ichi's limited potential for growth.

NOT A GREAT GROWTH STORY

Unlike other Asian life insurer IPOs completed last year or still to come, such as South Korea's Samsung Life Insurance Co and Korea Life Insurance Co Ltd, Dai-ichi, a mature company in a shrinking market, lacks a compelling growth story.

It has about 8 million policyholders, but that number has fallen every year in the past decade as Japan's population ages and the customer base dwindles, and the value of products purchased by new policyholders has dropped annually since 1991.

The demutualization and listing, which will see the company name changed to Dai-ichi Life Insurance Co, will allow Dai-ichi to explore other fundraising options to support expansion.

Some industry experts say recent big capital raisings in the secondary market, including an $11.2 billion share issue from Mitsubishi UFJ Financial Group, prove that new offerings can be easily absorbed.

In Japan, money flow is stagnating now, but investors have a lot of appetite for stocks, said Kazuma Yoshimura, director for equity capital markets at Nikko Cordial Securities.

That was proven last year when several big companies went to the market to raise a lot of capital.

Others, though, caution the IPO could suck up liquidity from the market and pressure prices of other shares. T&D shares have fallen nearly 2 percent since the Dai-ichi Life IPO was announced on February 22.

Dai-ichi said Japanese firms such as Mizuho Corporate Bank, Sompo Japan Insurance Inc and Bank of Tokyo-Mitsubishi UFJ would buy 2.1 million shares, helping establish a stable shareholder base.

After Dai-ichi Life, several big Tokyo IPOs are waiting in the wings, with Otsuka Holdings, a maker of drugs and food products, preparing to go public this summer with a possible market capitalization of as much as $11 billion, two sources have said.

Japan's cash-strapped government may also sell shares in Tokyo Metro Co and Narita International Airport Corp. The Tokyo Stock Exchange also wants to list, though plans have been on hold due to the weak IPO market.

Nomura Holdings Inc, Mizuho Securities Co Ltd and Bank of America-Merrill Lynch will arrange the Dai-ichi Life IPO. (Additional reporting by Kim Yeon Hee in SEOUL, editing by Edwina Gibbs and Valerie Lee)

Japan Investment