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LIC IPO: Policyholders lead subscriptions on Day 1; total issue subscribed 67%

The portion reserved for employees was subscribed 1.17 times, while the quota for retail investors was subscribed to the extent of 60%. Individual investors have shown keen interest in the insurer’s IPO (initial public offering).

Retail investors can apply for the shares on Saturday, May 7.
Retail investors can apply for the shares on Saturday, May 7.

Life Insurance Corporation’s (LIC) maiden public issue was subscribed 67% on Wednesday, the first day of the issue. The subscriptions were led by LIC’s policyholders and the quota reserved for them was subscribed 1.99 times. In all, bids for 44 million equity shares were received from policyholders against 22 million on offer.

The portion reserved for employees was subscribed 1.17 times, while the quota for retail investors was subscribed to the extent of 60%. Individual investors have shown keen interest in the insurer’s IPO (initial public offering).

Paytm Money, a wholly owned subsidiary of One97 Communications, said the LIC issue attracted 20 times the number of applications that were received, on average on the first day, for the previous five IPOs. Further, one out of every three LIC IPO investors was a first-time investor.

Retail investors can apply for the shares on Saturday, May 7.

Demand from large investors remained comparatively subdued. The portion set aside for qualified institutional buyers (QIBs) was subscribed 33%, while the quota for non-institutional investors attracted a subscription of 27%.

The government is looking to raise Rs 20,557 crore by diluting a 3.5% stake in the country’s biggest life insurer. The IPO has already garnered Rs 5,627 crore from 123 anchor investors who have been allocated 59.29 million shares at Rs 949 per share. The anchor book was mainly led by domestic investors while demand from foreign funds remained muted.

The IPO has been priced at Rs 902-949 per equity share. Policyholders are entitled to a discount of Rs 60 apiece, while employees will get a discount of Rs 40. The issue has been priced at 1.1 times its embedded value (EV). Brokerages, however, believe that the valuation is at a significant discount to its listed peers. “LIC with its dominant position is well-placed to capture the highly underpenetrated life insurance industry in India. We like its increasing focus on non-par products which could boost its VNB margins. It is valued at 1.1x 1HFY22 EV which is at significant discount to its private listed peers,” analysts at Motilal Oswal wrote in a note.

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