Positive start: LIC's mega share sale subscribed 67% on first day

Life Insurance Corporation of India’s (LIC’s) initial public offering (IPO), which opened for subscription on Wednesday, was subscribed 67 per cent, or 0.67 times, at the end of Day 1, driven by robust interest from its policyholders, employees, and the retail segment. The issue will remain open till May 9.

The policyholders’ segment was subscribed close to two times, the employees’ segment 1.17 times, and the retail segment 0.6 times. The non-institutional investors and qualified institutional buyers’ segments were subscribed 0.27 times and 0.33 times, respectively, on the first day.

The offer received bids for 108.6 million shares against the offered 162.7 million shares. The retail category and LIC employees were given a discount of Rs 45, while LIC policyholders were given a discount of Rs 60 per share. The issue has a price band of Rs 902-949.

Interestingly, LIC’s IPO will remain open for subscription even on the weekend, given the large amount the government is looking to raise from the market.

The insurance behemoth on Monday raised Rs 5,627 crore from anchor investors ahead of its 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, with 42.17 million shares allotted to 15 domestic mutual funds through 99 schemes.

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.

The government is 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.

LIC has been valued at 1.1 times its embedded value of Rs 5.39 trillion. Post listing, it could have a market cap of Rs 6 trillion, making it one of the most valuable firms in the country.