LIC IPO: Rs 5,600 cr raised from anchor investors

Life Insurance Corporation of India (LIC) raised Rs 5,627 crore from 123 anchor investors on Monday, ahead of the state-run insurer’s initial public offering, which will open for subscription on Wednesday. About 59.3 million shares were allotted to anchor investors at Rs 949 each, the upper end of the price band for the IPO, the company said on Tuesday. The IPO, India’s biggest, will close on May 9.

Society Generale, Government Pension Fund of Norway, Government of Singapore, Monetary Authority of Singapore, and BNP Investments, are among the foreign funds that are invested.

About 42.17 million shares were allotted to 15 domestic mutual funds, including SBI, ICICI Prudential, HDFC, Aditya Birla, Axis, Nippon, and UTI. HCL Corporation, NPS Trust, PNB Metlife, and Bajaj Alliance General Insurance were some of the other anchor investors.

The government aims to raise Rs 20,600 crore from investors through the IPO. Of the 221.37 million shares on offer, around 98.8 million are reserved for qualified institutional buyers, and 29.6 million are non-institutional buyers.

A little over 1.58 million shares are reserved for LIC employees and another 22.1 million for policyholders. While retail investors and employees will get a discount of Rs 45 per share, LIC policyholders will get a Rs 60 discount per share on the offer price.

Market regulator Securities and Exchange Board of India last week notified relaxed rules for anchor investors, under which the lock-in period for shares allotted to anchor investors will remain 30 days until June 30 for issues exceeding Rs 10,000 crore.

Sebi had recently tightened the rules, stipulating that for public issues of a size less than Rs 10,000 crore and opening on or after April 1, half the shares allotted to anchor investors would be locked in for 90 days and the remaining would have a 30-day lock-in period. However, for public issues of more than Rs 10,000 crore, the new rule on anchor investors would only be effective from July 1. Before April 1, shares allotted to anchor investors in an IPO were subject to a 30-day lock-in.

According to market participants, LIC shares are currently commanding a premium of Rs 85-90 in the grey market, which is about 10% premium to the upper end of the price band.

The government, the promoter of LIC, is offering a 3.5% stake, or 221.37 million, shares in the IPO. At the upper end of the price range, the company is valued at Rs 6 lakh crore, implying a price to embedded value of 1.1 times.

Once listed, LIC would become India’s fifth largest company in terms of market capitalisation at the IPO offer price range, after Reliance Industries, Tata Consultancy Services, HDFC Bank and Infosys.

LIC is the largest asset manager in India, with assets under management (AUM) of Rs 40.1 lakh crore as of December 2021, which were more than 3.2 times the AUM of all the private sector players and 15.6 times the AUM of the second largest player.

In July last year, online food delivery and restaurant discovery platform Zomato raised Rs 4,197 crore from 186 anchor investors, still a record in terms of the number of anchor investors. In October, fashion and beauty eCommerce platform Nykaa raised Rs 2,396 crore from 174 anchor investors.