Insurance behemoth Life Insurance Corporation of India’s (LIC’s) initial public offering (IPO), the biggest ever in the country, saw 2.95 times more demand than the shares on offer on the final day of bidding on Monday, generating bids worth Rs 43,933 crore.
The subscription was primarily driven by domestic investors, mainly retail. The IPO saw 7.33 million applications from retail investors, the highest ever for a domestic issue, topping Reliance Power’s 2008 record of 4.8 million. The issue, however, got a lukewarm response from foreign portfolio investors (FPIs) amid global risk-off sentiment due to rising bond yields.
The policyholders’ portion saw the maximum subscription at over six times, generating bids of over Rs 12,000 crore. The employees’ portion was subscribed 4.4 times, while the retail individual investors’ part saw two times subscription with bids worth over Rs 12,450 crore.
The qualified institutional buyer (QIB) and high networth individual (HNI) categories were subscribed 2.83 times and 2.91 times, respectively, generating bids worth Rs 18,815 crore. FPIs submitted bids of less than Rs 2,300 crore.
The offer received bids for 478,367,010 shares against the offered 162,078,067 shares (excluding those offered to anchor investors), according to data available on the bourses.
Market players said LIC’s strong brand recall, coupled with the additional discount for small shareholders, had enthused many first-time investors about the IPO. The government has set the IPO price band at Rs 902-949 per share, with an additional discount of Rs 45 for retail investors and Rs 60 for the policyholders. The IPO opened for subscription on May 4 and was open during the weekend also.
Last week, the insurer raised Rs 5,627 crore from anchor investors, 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, with 42.17 million shares allotted to 15 domestic mutual funds through 99 schemes.
The government was looking to raise Rs 20,557 crore by diluting a 3.5 per cent stake in the insurer, making it the biggest public offering of the Indian capital market. Initially, the government was looking to dilute 5 per cent in the insurer, but given the volatile market conditions due to geopolitical tensions, it decided to reduce the equity dilution.
At the upper end of the price band, LIC will have a market cap of Rs 6 trillion, making it India’s fifth most valuable firm. The insurance giant had an embedded value (EV) of Rs 5.4 trillion as of September 2021. The IPO values the insurer at 1.1 times EV, lower than its private sector peers, which currently trade between 2 and 3.5 times their EV.