On Wednesday, Life Insurance Corp. (LIC) of India policyholders, who are eligible for a discount on the sale price, employees and other retail investors subscribed to 67% of the shares on sale.
Strong demand for the shares came on a day the benchmark indices Sensex, and Nifty fell 2.29% each after a surprise interest rate hike by the Reserve Bank of India.
The portion of the share sale reserved for policyholders saw the strongest demand on the first day, with the segment getting subscribed 1.99 times. The retail investor portion was subscribed 60%, while the portion reserved for institutional investors and high net-worth individuals were subscribed 33% and 27%, respectively, according to data from stock exchanges. Shares reserved for LIC employees were subscribed 1.17 times.
The LIC share sale ends on 9 May, running longer than other initial share sales, which are open for three days. Subscription to the share sale will also be open on Saturday, 7 May. The shares will debut on stock exchanges on 17 May.
The Indian government is offloading a 3.5% stake in LIC for ₹21,000 crore. Earlier on Monday, LIC raised ₹5,627 crore by selling shares to so-called anchor investors.
The price band for the share sale has been fixed at ₹902-949 apiece. Retail investors and LIC employees have been offered a discount of ₹45 per share, while policyholders have been offered a discount of ₹60 per share.
The strong demand from policyholders and retail investors is in line with the trend witnessed in the anchor subscription segment, where domestic institutional investors made substantial bids.
Domestic mutual funds subscribed to 74% of the share offered in the anchor allocation, even as foreign institutional investors’ participation was tepid, subscribing to just 17.7% of the anchor allocation.
Domestic mutual fund purchases were led by SBI Funds Management Ltd, ICICI Prudential Asset Management Ltd and HDFC Asset Management Co. Ltd. Overseas investors included BNP Investments, Norway’s Government Pension Fund Global and the government of Singapore.
While the government planned to sell 5% of LIC initially, the issue size was reduced to 3.5% and the valuation lowered to ₹6 trillion as markets turned volatile on account of the Russia-Ukraine war, global inflationary concerns and rising interest rates.
“This is the right size, considering the current capital market environment and will not crowd out capital and monetary supply, given the current environmental constraints," Tuhin Kanta Pandey, secretary for the Department of Investment and Public Asset Management (Dipam), said at a press conference in Mumbai last week.
“Valuation flows from optimizing positioning, devising the best marketing strategy, accessing investors in the right way and right sequence, structuring the deal appropriately and selecting the optimal market window," he added.
