LIC's record IPO set to be fully subscribed as valuation drives demand

A 210 billion rupee ($2.7 billion) record share sale by state-run Life Insurance Corp. of India is poised to be fully taken up by investors four days before the offering closes as a low valuation and deep retail discounts drive demand.

By Thursday, the second day of the offering, investors had already put in orders for 90% of the shares for sale in India’s biggest IPO. Around 35% of the total issue is reserved for retail investors and 83% of that tranche was sold 3:15 p.m. in Mumbai, stock exchange data showed.

Demand from LIC insurance policyholders was for more two-and-a-half times the amount of shares earmarked for them, while employees submitted orders for about two times the number of shares available. 

“LIC IPO is very attractively priced and the government has done a right job of downsizing the size and reducing the valuation expectations,” Rajeev R Shah, chief executive officer at RBSA Advisors said in an interview with Bloomberg TV. 

India’s government, the sole shareholder of the former monopoly player, was last month forced to cut the size of the deal by 40% as the war in Ukraine hit valuations. It intends to use the cash raised from the sale to plug a shortfall in its budget.

The government is selling 221.4 million LIC shares at between 902 rupees and 949 rupees each, which would raise as much as 210 billion rupees if priced at the top --- far below the 500 billion target earlier.

“LIC looks all set to be fully sold on the second day itself, which would be a major achievement for such a large IPO,” said Aditya Kondawar, an independent IPO analyst.  

The performance is in contrast to that of the $2.5-billion IPO of Paytm, the Indian digital payments pioneer, which saw a sluggish start and was fully sold only on the last day of the issue.  

“By pricing the issue at a lower valuation and discounts to policyholders, the government has ensured its success,” he said.