The country’s largest initial public offering (IPO) from Life Insurance Corporation of India (LIC) will open for subscription on Wednesday amid volatility in the secondary markets on account of headwinds such as rising inflation and interest rates and a weakening global growth outlook because of rising Covid cases in China and Russia’s invasion of Ukraine.
What should generate some hope for the Narendra Modi-government, which has trimmed the IPO size, is the solid response from anchor investors on Monday, which could attract retail and other categories of investors.
The country’s largest insurer raised Rs 5,627 crore from anchor investors, with domestic mutual funds cornering over 71 per cent of the 59.3 million shares that were set aside for this category.
Anchor investors are institutional investors to whom shares are allotted on a discretionary basis — and not on pro-rata basis — before an IPO opens for subscription. The shares are subject to a lock-in period that bars their sale in the secondary markets for 30 days.
The LIC IPO will be open for subscription to qualified institutional buyers (QIBs), non-institutional investors, retail individual investors and policyholders from May 4-9 at a price band of Rs 902-949 per share.
Analysts said the good anchor book was likely to stimulate the interest of the retail investors since the small investors ascertain the interest of the larger players before putting their money in a large issue.
“Looking at the participation of anchor investors, it seems that there is an interest for the LIC IPO. Though one has to see how the other investors respond, it is an encouraging start,’’ Arun Kejriwal, director, KRIS, an investment advisory firm, said.
The Securities and Exchange Board of India (Sebi) had sought to ramp up the interest of the anchor investors by deferring the rule that subjects them to a longer lock-in period of 90 days.
The market regulator has said public issues of over Rs 10,000 crore till June 30 will have a lock-in period of 30 days.
LIC said in a regulatory filing it has allotted 59.2 lakh shares to anchor investors at Rs 949 per share. “Out of the total allocation of 59,296,853 equity shares to the anchor investors, 42,173,610 equity shares (71 per cent of the total allocation) were allotted to 15 domestic mutual funds through 99 schemes,’’ the insurer said. In all, 123 investors (that included other investors) subscribed to the IPO.
Apart from the domestic fund houses, some of the marquee investors to participate in the anchor round include Government of Singapore, Monetary Authority of Singapore, Government Pension Fund Global, BNP Investments llc, Societe Generale, Saint Capital Fund and Invesco.
Domestic fund houses and life insurance companies investing in LIC include SBI Mutual Fund, Axis Mutual Fund, ICICI Prudential, Aditya Birla Sun Life, Nippon Life India, Kotak Mahindra Life Insurance, Bajaj Allianz General Insurance, UTI Mutual and Tata Investment Corporation.
While the IPO will remain open for subscription from May 4-9, the government is anticipating a strong response from retail investors who can invest up to Rs 2 lakh in an issue.
Around 2.9 crore shares are reserved for the retail investors. Policyholders will get a discount of Rs 60 per share while retail shareholders and employees of the corporation will get a relief of Rs 45 per share.
The LIC share is expected to list on May 17.