India’s largest insurer Life Insurance Corporation (LIC) is set to debut on the exchanges on Tuesday. The insurer’s offering, at Rs 21,000 crore, is the country’s largest even after the issue size was cut.
Despite the sharp selling in the markets and volatility across global markets the issue has been subscribed almost three (2.95) times. Overall proceeds from the IPO make up about a third of the government’s Rs 65,000 crore disinvestment target for the current fiscal.
B Gopkumar, MD & CEO, Axis Securities, said earlier this month, “The LIC IPO received phenomenal participation from retail investors, as anticipated. The marginally higher discount offered to eligible policyholders was one of the reasons for the issue being subscribed 6x in their quota. We have seen this IPO acting as a stimulus in driving retail participation in equity markets.”
Analysts believe that the listing of the insurer will further raise the relevance of the industry in investor portfolios. “LIC’s listing will broaden investible universe … It will also help investors to better track sector dynamics as LIC disclosures become frequent,” analysts at Jefferies wrote in a note earlier this year.
LIC will play on the growth story of the under-penetrated insurance industry. The stock movement will also depend on the government’s plan to dilute further. Hemang Jani, head – equity strategy, B&D, Motilal Oswal, said, “Investors who applied from the long-term perspective should keep in mind that its prospects depend upon the company’s performance in the competitive market and we would like to await its performance over next few quarters before forming any view.”The listing comes at a time when markets across the globe are going through a correction amid concerns over rising interest rates and geopolitical tensions.
However, retail investors (policyholders, employees, and retail) have placed their faith in LIC’s offer, even when demand from institutional investors was lower.
The quota reserved for policyholders was subscribed 6.12 times during the share sale, attracting bids worth 12,034 crore. Retail investors bid for 137 million shares between May 4-9, against 69 million on offer. The portion set aside for employees was subscribed 4.4 times. Overall, the issue attracted bids worth43,933 crore against issue size of Rs 20,557 crore.
The government has said there will be no follow-on public offering at least for the next year. The insurer will list at a valuation of Rs 6 lakh crore on the bourses. Shareholding of the promoter (Government of India) stands at 96.5% after a 3.5% stake dilution in the public offer. However, this remains lower than the 5% dilution planned earlier, which could have fetched the government around Rs 60,000 crore.