By Malini Bhupta
If there’s one company that can be credited for taking the equity cult to the masses, it has to be Reliance Industries. Back in 1977, the company drew scores of new investors, who had never invested in stocks before, when it went public. The mega share sale by the Life Insurance Corporation of India is further giving legs to the equity cult in India, as millions of new-to-equity customers prepare to board the IPO gravy train.
Not surprising that finance minister Nirmala Sitharman says there is a buzz around the IPO. Large bank-promoted brokers are adding anywhere between 50,000 and 2 lakh demat accounts each month by new-to-equity customers ahead of the IPO.
FE has learned that the insurer is working closely with depositories and five big bank-led brokers to attract a new category of investors to the IPO. The insurer is looking to raise around Rs 65,000 crore through its share sale, which is nearly 50% of the total IPO proceeds of last year. Given the market conditions, investment bankers believe that the retail category will play a big role in making the issue a success.
Large brokers have come up with specially curated plans for first-time investors, policyholders and distributors of LIC. B Gopkumar, MD & CEO, Axis Securities, said, “There is a fair degree of interest in the LIC IPO from retail investors. We opened around 45,000 accounts for the IPO alone last month. Of these additional accounts, 40% of customers are new to the market and had not done their KYC before.”
Other bank-led brokers are using technology to map customers who are policyholders yet do not have any account, so that the broking division can reach them and offer them attractive packages to open accounts. LIC has partnered with NSDL and CDSL to help policyholders link their policies with their PAN and also open demat accounts. The outcome of these initiatives is that 70 lakh policyholders have opened demat accounts ahead of the IPO.
According to DRHP, 35% of the net offer will be earmarked toward retail. LIC has also indicated in its DRHP that up to 10% of the issue may be reserved for policyholders, while up to 5% of the same may be reserved for employees. According to Ashish Nanda, joint president, Kotak Securities, “Going by the trend in the last three months, the broking industry is opening approximately 33-34 lakh accounts monthly. In our estimates, though 60-70% of accounts being opened should be new to broking. From the enquiries we are receiving surely we see a lot of interest among policyholders.”
HDFC Securities has rolled out a series of measures to attract LIC employees and agents at LIC offices across India on IPO and value proposition offered by it.
The brokerage has also made educational videos and organised webinars for existing customers. Vidit Jain, product head – equity and derivatives, HDFC Securities, said, “We have specially curated plans for LIC agents and employees, wherein we are offering brokerage discount of up to 50% and no brokerage LIC stock. For LIC policyholders, we have our great offers spanning across free equity delivery volumes, discounted brokerage rate across equity and derivatives segment, free ETFs, same day credit of sales proceeds etc, on selected value plans.”