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MUMBAI : Lenders have taken special measures to help Life Insurance Corp. of India’s (LIC’s) employees and customers subscribe to the mega initial public offering (IPO). State Bank of India (SBI), for instance, is offering a personal loan of up to 20 lakh, or 90% of the purchase price of shares, whichever is lower, to the employees of LIC, at a special rate of 7.35%, lower than the three-year marginal cost of lending rate (MCLR) of 7.4%.

Besides, SBI also waived off the processing fee for the five-year loan for LIC employees, where 10% of the loan amount will be taken as the margin with no security or guarantee. A small portion, or 1.58 million shares on sale is reserved for LIC employees. As of the second day of bidding, this portion of the share sale was oversubscribed 2.21 times, indicating strong interest among the employees.

According to the draft prospectus, an LIC employee, who is also a policy holder and a retail investor, can invest up to 6 lakh in the IPO. However, when asked why the maximum loan amount was pegged at 20 lakh, an SBI official said that the plan was floated well in advance and the bank was not aware of LIC’s terms for subscribing to the IPO.

That apart, LIC employees are also enjoying a discount of 45 per share on a price band of 902-949 for the IPO. LIC’s draft prospectus said it has 114,498 employees.

To support India’s largest IPO, the Reserve bank of India (RBI) has also allowed banks to keep their branches open to process the application supported by blocked amount for the public on 8 May, which will allow bids for the IPO to be accepted on Saturday as well as Sunday between 10am to 7pm.

While IPOs remain open for only three days for public subscription, the LIC share sale, given its size, has been allowed to remain open for six days.

As of Thursday, the LIC IPO was subscribed 103%. The portion reserved for institutional investors was subscribed 40% on the second day of bidding. The policyholders portion saw highest demand, with oversubscriptions of 3.11 times. The retail investor portion was subscribed 93%, while the portion reserved for high net-worth individuals was subscribed 47%, according to data from stock exchanges.

The government, is selling a 3.5% stake in the state-owned insurance behemoth, instead of the initially planned 5% due to market condition. The LIC IPO will be a pure offer for sale, and the proceeds will go to the government.

Retail investors were allotted 35% of the total shares on offer, at a discount of 45 to the IPO price. About 10% of the float was earmarked for policyholders, who gets a 60 discount on each share. The minimum lot size is 15 shares.

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