The initial public offering (IPO) of Life Insurance Corporation of India (LIC) started on a positive note with the anchor book over-subscribed on Monday. The IPO was open to institutional anchor investors on Monday, while retail investors and others can bid for the shares from May 4-9.
The float will see the government selling 22.13 crore shares at a price band of Rs 902-949 a share. At the upper end of the price band, the Centre will raise about Rs 21,000 crore.
The Centre has reserved 9.88 crore shares for qualified institutional buyers (QIBs). The quota for anchor investors is over 5.92 crore shares from the QIB lot, which translates to Rs 5,625 crore at the upper end of the price band.
Though subscription details were not available at the time of going to the press, sources said the anchor investors have bid for shares worth Rs 7,500 crore.
The anchor portion saw the participation of global pension funds, domestic mutual funds and sovereign funds. According to reports, GIC of Singapore and Norwegian wealth fund Norges Bank have subscribed to the offer. Domestic mutual funds such as HDFC Mutual Fund and SBI Mutual Fund have also participated in the offer.
The IPO has reserved 2.96 crore shares for non-institutional buyers: up to 15.8 lakh shares for employees and 2.2 crores for policyholders. While retail investors and LIC employees will get a discount of Rs 45 per share, LIC policy holders will get a discount of Rs 60 a share. LIC is likely to be listed on the bourses on May 17.
The government is expecting retail investors and even LIC policy holders to make a beeline for the issue. Some of the brokerages have already recommended that investors subscribe to the issue.
“With its majestic network and expected double digit growth the industry complied with attractive valuation compared with peers makes LIC IPO a lucrative Investment. We recommend ‘subscribe’ to the issue’’, a note from GEPL Capital said.
The brokerage added that the embedded value (EV) for LIC is Rs 5.3 lakh crore and its post issue implied market capitalisation is Rs 6 lakh crore.
The IPO thus values LIC at 1.1 times embedded value However, the market cap to EV ratio for its listed peers is relatively higher in the range of 1.5-2.5 times.
