It was yet another strong day for the Life Insurance Corporation of India (LIC), as its maiden public issue garnered Rs 15,115.5 crore worth of bids on May 5, the second day of bidding. This was an increase from around Rs 10,000 crore worth of bids on the first day.
The largest ever public issue in the history of Indian capital markets was subscribed 1.03 times on May 5, getting bids for more than Rs 16.68 crore in equity shares against an offer size of 16.2 crore shares, as per the cumulative data published by exchanges.
Policyholders and employees retained their leading position as they subscribed 3.11 times and 2.22 times the allotted quota, respectively, while other portions are yet to be fully subscribed.
Retail investors bought 93 percent of the shares of the reserved portion, while the portions set aside for qualified institutional buyers and non-institutional investors were subscribed at 40 percent and 47 percent, respectively.
The Rs 21,000-crore public issue was opened for subscription on May 4 and will run till May 9. The issue will remain open on Saturday and Sunday as well.
The insurance behemoth has already mopped up more than Rs 5,000 crore from anchor investors, including 15 mutual funds, which invested over Rs 4,000 crore through their 99 schemes on May 2.
The entire issue of more than 22.13 crore equity shares is an offer for sale by the government of India, which is equivalent to 3.5 percent of the total shareholding that was reduced from 5 percent decided earlier. Hence, the company will not receive any funds from the offer for sale and the entire amount will go to the government.
Retail investors and LIC employees will get shares at a discount of Rs 45 per share to the final offer, while the discount to policyholders is Rs 60 per share.
LIC, which will get Rs 6 lakh crore of market capitalisation at the upper price band of Rs 949 per share, is the largest life insurer in India, with a 62 percent and 61 percent market share in terms of gross written premium (GWP) and new business premium (NBP), respectively.
The insurer is ranked 5th globally by life insurance GWP and 10th globally in terms of total assets. It had the biggest AUM of Rs 40 lakh crore at the end of December 2021, which is 1.1x of the entire Indian MF industry AUM and 3.2x of the total AUM of all private life insurers in India.
LIC, with its dominant position, is well placed to capture the highly underpenetrated life insurance industry in India. We like its increasing focus on non-par products, which could boost its VNB margins. "It is valued at 1.1x 1HFY22 EV, which is at a significant discount to its private listed peers," said Motilal Oswal, which suggests investors subscribe to the IPO.
In fact, all the brokerages have assigned a subscribe rating to the IPO, citing discounted valuations to private listed peers and a dominant position in the life insurance industry, which is highly underpenetrated compared to other developed countries.