India raised 205.6 billion rupees ($2.7 billion) as its biggest-ever initial public offering priced at the top of the range following strong demand from local investors and a last-minute dash by foreign funds.
The government has fixed the issue price of LIC shares at Rs 949 apiece, the upper end of the IPO price band, ahead of the listing of the country’s largest insurer on May 17.
However, LIC policyholders and retail investors have got the shares at a price of Rs 889 and Rs 904 apiece, respectively. The Initial Public Offering (IPO) of Life Insurance Corporation (LIC) closed on May 9 and shares were allocated to bidders on May 12.
The government sold over 22.13 crore shares or a 3.5 percent stake in LIC through the IPO at a price band of Rs 902-949 a share.
The retail investors and eligible employees of LIC were offered a discount of Rs 45 per equity share over the issue price, while policyholders got a discount of Rs 60 per share.
As per the prospectus filed by LIC on May 12, the offer price of the share sale has been fixed at Rs 949 per equity share. Shares were allocated to policyholders and retail investors after applying the discount applied to them.
Listing
Shares of LIC are trading at a discount of about 30 rupees to its IPO price in the so-called gray market, traders told Bloomberg News. The expectation for a strong debut by LIC’s shares is waning as the demand in the unregulated market, where investors bet on listing day gains, has come down over the last few days.
Retail investors and LIC policyholders were among the most enthusiastic about the offering, thanks to the discounts they were offered.
The portion reserved for them was fully taken up days before the offering was closed. The anchor portion of the IPO drew in sovereign funds from Norway and Singapore while other foreign investors picked up pace only on the last day.
Overall, the LIC offer was oversubscribed by nearly three times. The money will help the government bridge a budget deficit that’s expected to widen as commodity prices soar across the world.
For the banks working on the IPO, the share sale might not give them large fees but offers glory in the league table rankings, Bloomberg News has reported.
The 10 banks on the IPO received a total of 118 million rupees as fees, according to the prospectus, a fraction of what they could have typically pocketed for an offering of this size.
About IPO and Details
The government liquidated 3.5 percent of its stake in the state-run insurance behemoth through the public offering. Retail investors and qualifying workers received a Rs 45 discount per equity share.
The policyholders received a Rs 60 discount per share. Due to the current stormy market circumstances, LIC lowered its IPO size to 3.5% from 5% previously agreed.
Even with the lower size, the LIC IPO will be the largest initial public offering in the country. So far, the amount raised through Paytm’s IPO in 2021 has been the highest ever at Rs 18,300 crore, followed by Coal India and Reliance Power.
LIC, the country’s oldest insurer, was founded in the late 1950s and had the market to itself until the government opened it up to the private competition in 2000. It is still India’s largest insurer, with a sales agent in practically every neighbourhood across the 1.4 billion-person country.
For the first time, the corporation has retained a distinct quota for policyholders, who will receive a 10% reserved allocation and a discount when purchasing LIC shares.
