LIC IPO sees 27% subscription in two hours, muted non-institutional demand

The initial public offering of insurance behemoth Life Insurance Corporation (LIC) opened for subscription on May 4 and by the first two hours, around 27 per cent of the shares up for sale were subscribed, with policyholders and employee’s driving the subscription along with retail investors.

At 12:00 noon, policyholders had subscribed 95 per cent of the shares reserved for them, employees had bid for 46 per cent of the shares reserved for them, and retail investors had subscribed to 30 per cent of the shares reserved for them.

The non-institutional category, consisting of corporates, individuals, and others has seen muted demand, with only 5 per cent subscription so far.

The insurer’s IPO will remain open from May 4 to May 9. The government is looking to raise Rs 20,557 crore from the share sale by diluting 3.5 per cent of its stake in the insurance behemoth, instead of 5 per cent proposed earlier, due to volatile market conditions amid geopolitical tensions in Europe. 

LIC on Monday raised Rs 5,627 crore from anchor investors ahead of its mega IPO, with 71 per cent of the amount coming from domestic mutual funds (MFs). In total, the state-owned insurance giant allotted nearly 59.3 million shares to 123 investors at Rs 949 apiece.

“Out of the total allocation of 59,296,853 equity shares to the anchor investors, 42,173,610 equity shares (71 per cent of the total allocation) were allotted to 15 domestic mutual funds through 99 schemes,” LIC said in a stock exchange disclosure.

SBI Mutual Fund subscribed to shares worth over Rs 1,000 crore via four different schemes. ICICI Prudential MF subscribed to shares worth over Rs 700 crore through over half a dozen schemes and HDFC MF subscribed to shares worth over Rs 650 crore of the insurer via 10 different schemes. Aditya Birla Sun Life MF and Axis MF were other major subscribers among domestic fund houses.

Among foreign funds, the Singapore government’s sovereign wealth fund (GIC) subscribed to shares worth over Rs 400 crore through three funds and BNP Investments subscribed to shares worth nearly Rs 450 crore.

A little over Rs 1,600 crore came from overseas funds. The low demand from foreign funds is on the back of ongoing risk aversion among foreign portfolio investors (FPIs). So far this year, foreign portfolio investors (FPIs) have sold shares worth Rs 1.3 trillion ($17.3 billion), according to data provided by NSDL.

Despite the reduced size, LIC’s IPO will be India’s biggest ever, surpassing the Rs 18,300-crore IPO by One97 Communications (Paytm) in November 2021. The digital payments major, however, had a larger anchor book, worth Rs 8,235 crore. This was because Paytm didn’t meet the profitability criteria and hence had to set aside a larger portion of shares for institutional investors.