The initial public offering of the Life insurance corporation (LIC) has opened for subscription on Wednesday, May 4, 2022, and will conclude on May 9, 2022. So far, Paytm, which mobilized Rs 18,300 crore last year, and Coal India with Rs 15500 crore have raised the maximum amount from the secondary market.
LIC aims to raise Rs 20,557 crore through a 3.5 per cent share sale. Earlier, LIC has said it has garnered a little over Rs 5,627 crore from anchor investors led primarily by domestic institutions.
LIC IPO: Life Insurance Corporation has set a price band of ₹902 to ₹949 per equity share for the public offer, which closes on May 9. Though trimmed, LIC IPO will be the biggest public offer to date in the country.
The government is offloading 3.5% or 22.13 crore shares and targets to raise ₹20,550 crores through this public issue. The government had decided to reduce the size of the IPO due to the volatility in the market.
LIC policyholders will get a discount of ₹60 per equity share. Retail and employees will get a discount of ₹40. LIC IPO is set to see strong demand, given attractive pricing, says analysts. According to market observers, LIC is trading a healthy premium or GMP.
Biggest IPO in Indian Markets: LIC IPO subscription status
The biggest initial public offering (IPO) in the history of Indian markets, LIC IPO is subscribed 64 percent, at 17:57 hours IST on May 4, the first day of bidding. The LIC policyholders lead the initial bout of buying in the insurer’s IPO as they have subscribed 1.9 times the portion reserved for them.
The employee reserved portion has been subscribed 111 percent, while retail investors portion has been subscribed 57 percent. Non Institutional investors have subscribed 26 percent of their portion while qualified institutional buyers bought 33 percent of allotted quota of 3.95 crore shares, till now.
The IPO may shatter the 10 million applications mark, beating the record of 4.8 million applications received by the Reliance Power NSE -4.58 % IPO in January 2008, they said.
Having raised ₹5,600 crores via anchor investors, LIC is set to see heavy retail demand, the bankers said, pointing to factors such as schemes offered by brokerages to boost the opening of Demat accounts, the 1.4 million LIC agents, and 2,000 branches spread across the country.
LIC is currently commanding a premium of Rs 85 per share in the grey market, about 9% more than its price band of Rs 902-949 per share. Though the premium has declined to Rs 85 a share from Rs 90 in the past two days, it is still substantial given the large discount being offered to employees as well as policyholders.
Out of the 221.3 million shares for sale, LIC has reserved about 1.58 million shares or 0.71% for employees, while 22.1 million shares or about 10% are reserved for policy Retail and employees will get a Rs 45 discount per share, while policyholders will get a Rs 60 discount per share.
What Brokerages said
ICICI Direct
ICICIDirect, which has not rated the issue, said that LIC is a market leader in the Indian life insurance industry with a strong distribution network and diversified product suite.
Geojit Financial Services
Geojit Financial has assigned a ‘subscribe rating on a short to medium-term basis. The current valuation is attractive due to its strong market presence, improved profitability due to changes in surplus distribution norms, and strong sector growth outlook.
Despite headwinds such as declining market share, lower short-term persistency ratios, and sub-par margins demanding a discount to private players.
Angel Broking
“Though there are concerns over LIC regarding market share loss in the individual insurance business and historically lower margins, we believe that valuations factor in most of the negatives,” said Angel One.
