On the final day of issuance on Monday, Life Insurance Corporation’s (LIC’s) Rs 21,000-crore initial public offering (IPO) was subscribed 2.95 times.
Despite the volatility in the equity markets and a less-than-enthusiastic response from foreign portfolio investors, the issue attracted bids worth close to Rs 43,931 crore.
Allotment of shares will be finalised on May 12 and the insurer will list on the exchanges on May 17.
Tuhin Kanta Pandey, secretary, department of investment and public asset management, said the insurer may not come out with a follow-on offer in the next one year. “The issue was subscribed predominantly by domestic investors. Response from foreign investors hasn’t been very good,” he said.
The IPO received bids for 478 million equity shares against 162 million shares on offer. Prior to the offer, LIC had garnered Rs 5,627 crore from anchor investors.
Most of the bids from institutional investors and high net-worth individuals (HNIs) came in on the last day of bidding on Monday, with the portion set aside for qualified institutional buyers (including FPIs/banks/mutual funds) being subscribed 2.83 times and the portion for non-institutional investors being subscribed 2.91 times.
Amid a discount of Rs 60 for the insurer’s policyholders, the quota reserved for them was subscribed 6.1 times till Monday, whereas the employee portion, which included a discount of Rs 45 per equity share for employees of the company, was subscribed 4.4 times on the final day. Retail investors bid for 137 million shares against 69 million shares on the offer – with the quota being subscribed 1.9 times overall, data from exchanges showed. Retail investors, too, had a discount of Rs 45 per equity share in the public offer.
Financial service secretary Sanjay Malhotra said the LIC shares “should give decent returns” to investors in the short, medium and long terms.
The price band of the issue was set at Rs 902-949 per equity share with the government expecting to raise up to Rs 21,000 crore from a 3.5% stake dilution in the insurance behemoth. The valuation of the issue was, however, reduced to `6 trillion, and the stake dilution was trimmed to 3.5% from 5% expected earlier – primarily due to volatility in the equity markets and weak demand from foreign investors.
This marks the highest fund-raising through IPO by a company in the Indian capital markets. Prior to this, the highest fundraise was seen in Paytm IPO last year at Rs 18,300 crore and Coal India in 2010 at Rs 15,200 crore.
LIC, the fifth-largest life insurer globally, was formed by merging and nationalising 245 private life insurance companies on September 1, 1956, with an initial capital of Rs 5 crore. Currently, LIC manages assets worth Rs 40 trillion and operates through 2,048 branches, 113 divisional offices and 1,554 satellite offices. Overall, it has a market share of more than 61.4% in new business premium.