The initial public offering of Life Insurance Corporation of India has received a healthy response from investors and the offer was subscribed a total of 2.95 times. It received bids for 47.83 crore equity shares against the IPO size of 16.2 crore equity shares.
However, the Foreign portfolio investors (FPIs) invested only 5 percent of the subscription, around ₹4,000 crore in the mega IPO. Meanwhile, individual investors invested over ₹25,000 crore in the issue.
The portion set aside for policyholders was been subscribed 6.11 times, while employees bid 4.39 times the allotted quota and retail investors 1.99 times, while the reserved portion of qualified institutional buyers has booked 2.83 times and that of non-institutional investors 2.91 times.
In an earlier Reuters report, LIC's chairman, MR Kumar, had said that investors were concerned about LIC's growth prospects as it already dominates nearly a third of the Indian insurance market and has been losing market share to private players. His comments came a day after LIC filed its initial public offering (IPO) papers that showed India expects to raise up to $2.74 billion, just a third of its original target, from selling a 3.5 percent stake in LIC's IPO.
As per experts, the policyholder discount and quota in LIC IPO was a masterstroke by the government. The government gave an additional discount of ₹60 per share for the policyholder quota which boosted subscriptions in that quota. Further the ₹45 discount in the retail investor quota also increased subscriptions in the retail portion.
As per B Gopkumar, MD & CEO, Axis Securities it was not only the discount offered to retail investors that attracted the retail investors, but also the assurance of owning a stock like LIC, a market leader in the life insurance space.
“A long legacy and a strong growth runway despite intense competition given the under-penetration (India’s life insurance penetration at 3.2 percent as per RHP) of the life insurance industry, along with higher protection gap, also made the IPO more attractive,” he said.
In a report, Business Standard stated that participation from tier-2, -3 cities was high for the LIC IPO due to deeper policyholder penetration of LIC.
In the financial year 2021-22, the number of Demat accounts opened with brokerages rose 60 percent to nearly 9 crores.
The price band of LIC IPO was fixed at ₹902-949 per share and the government aimed to raise over ₹21,000 crore by selling over 22.13 crore shares or 3.5 percent of its stake.
Moody's in a recent report said that it expects, LIC to tighten its underwriting standards and improve its risk management and governance, which should contribute to a stronger financial profile. Given its dominant and market trendsetting position, these enhancements at LIC will likely drive similar improvements across the wider Indian life insurance sector, a credit positive.