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Business News/ Companies / News/  LIC initial share sale sees strong demand from anchor investors
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LIC initial share sale sees strong demand from anchor investors

LIC’s IPO will be the first to offer a 3.5% stake to the public, lower than the 5% regulatory minimum stipulated by Sebi

 ₹5,620 crore worth of shares reserved for anchor investors was fully subscribed.  (Photo: Bloomberg)Premium
5,620 crore worth of shares reserved for anchor investors was fully subscribed.  (Photo: Bloomberg)

NEW DELHI : Life Insurance Corp. (LIC) of India’s initial public offering has received a robust response from institutional investors, with 5,620 crore worth of shares reserved for anchor investors getting fully subscribed, government officials aware of the details said.

Investors, including Norwegian wealth fund Norges Bank Investment Management and Singapore sovereign wealth fund GIC, were allocated shares of LIC before the sale opens to the public on 4 May, the officials said, requesting anonymity.

“The anchor book is to be allocated up to maximum allowable of up to about 5,620 crore, and it is fully done," one of the two officials said.

Alongside global funds, domestic asset management companies such as HDFC Asset Management Co. Ltd, SBI Funds Management Ltd, ICICI Prudential Asset Management Co. Ltd and Kotak Asset Management Co. Ltd have also come in as anchor investors, a second official said.

The government expects to raise about 21,000 crore at the upper end of the price band in what would be India’s largest such sale. Tuhin Kanta Pandey, secretary of the department of investment and public asset management (Dipam), told Mint earlier that book size from anchor investors is expected to be around 5,600 crore.

Queries sent to the spokesman for the finance ministry on Monday did not elicit a response as of press time.

The government will sell 3.5% of LIC, or 221.3 million shares, of which 22 million shares will be reserved for policyholders and 1.5 million for employees of the insurance behemoth. LIC is valued at 6 trillion, which is just 1.1 times its original embedded value of 5.39 trillion, according to the government’s revised estimates.

The government has set the price band for the initial share sale of state-run LIC at 902- 949 a share, with a 60 discount for policyholders and 45 for employees. Retail investors, policyholders and employees will be able to invest 2 lakh each, and the categories will be mutually exclusive, Pandey had said, indicating that if an employee is a policyholder as well, he would be able to invest up to 6 lakh in the IPO.

The IPO will open for subscription to the public from 4 May till 9 May, and the shares will be listed on exchanges on 17 May.

Institutional investors who fail to get shares during the anchor allotment process can buy LIC shares from the qualified institutional buyers’ quota, which will offer shares worth at least 10,500 crore. Excluding reservations, the remaining shares will be allocated in the ratio of 50% to qualified institutional buyers (QIB), 35% to retail investors and 15% to non-institutional investors.

Mint reported earlier that the LIC IPO has already received 13,000 crore worth of investment commitments from anchor investors, more than twice the value of shares offered to such investors.

LIC’s IPO will be the first in the country to offer a 3.5% stake to the public, lower than the 5% regulatory minimum stipulated by the Securities and Exchange Board of India (Sebi). The government will begin talks with the markets regulator on the time LIC will need to meet the minimum shareholding norms, Mint had reported earlier. While there is no ambiguity on the percentage share of equity held by the government that needs to be taken to the markets under the norms, which will remain 25%, the government will seek exemption on the time limit of five years as it feels that meeting the equity sale requirement will put undue pressure on the markets.

The government’s stake sale in India’s largest insurer is still much lower than the at least 5% stake sale it had initially planned. Geopolitical tensions, soaring oil prices and monetary tightening by major central banks have made global investors skittish about emerging markets stocks, crimping demand for LIC’s shares. Waning investor demand after Russia’s invasion of Ukraine has also squeezed valuations.

Mint reported last week that the country’s largest insurer reported a stellar performance, with the first-year premium collection, a key metric, rising 7.9% to 1.98 trillion for the year ended 31 March.

LIC sold 21.7 million insurance policies in the year ended 31 March, 3.54% more than the previous fiscal, boosting its market share to 74.6% in terms of policies sold.

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ABOUT THE AUTHOR
Gulveen Aulakh
Gulveen covers both corporate and economy, and policy sections of Mint. She also covers telecom, IT from the corporate side and disinvestment, finance ministry from the economy side. Gulveen finds the rare mix of sectors she covers to be incredibly interesting.
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Published: 03 May 2022, 12:11 AM IST
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