India: Life Insurance Corp's IPO oversubscribed

| 09 May 2022

The initial public offering (IPO) of the country's largest life insurance company Life Insurance Corporation of India (LIC) has subscribed 1.79 times at the end of May 8, the fifth day of bidding.

So far, the record US$2.7-billion IPO has received bids for 290.8 million equity shares against an offer size of 162.0 million equity shares.

As at 8.03 pm of Day 5, the portion set aside for policyholders has been subscribed 5.04 times, that for employees and retail investors 3.79 times and 1.59 times, respectively, while that for qualified institutional buyers (QIBs) and non-institutional investors (NIIs) was 0.67 times and 1.24 times, respectively, according to Money Control.

The LIC subscription, set to close on May 9, is offering a discount to employees and retail investors of 45 rupees per share. LIC policyholders will be offered a discount of 60 rupees per share.

LIC set the initial price band at 902 rupees to 949 rupees a share.

After a reservation for employees (0.7%) and policyholders (10.0%), the remaining shares will be allocated in a ratio of 50% to QIBs, 35% to retail investors and 15% for NIIs.

The final IPO price will be determined after the subscription closes.

To drum up demand from retail investors, in addition to heavy advertising in local newspapers, some 1.2 million field agents were dispatched across India to woo many of LIC's more than 250 million policyholders to buy the shares.

The Indian government expects to raise up to US$2.7 billion, just a third of its original target, from selling a 3.5% stake in the country's top insurance company, giving it an initial value of around US$78.52 billion, which could make it among the country's top five companies.

Moody's Investors Service said LIC's IPO was credit-positive for India's life insurance industry as the listing will drive transparency and competitiveness in a sector dominated by the state-run insurer, which has more than 280 million policies.

However, the rating agency also said the benefits from the IPO will be limited until the government sells a substantial stake in the company, which has nearly 65% market share.