India’s largest initial public offering, Life Insurance Corp (LIC), $2.7 billion, saw a 67% jump on the first day, despite a surprise rate increase by the central bank shaking the markets.
According to exchange data, investors offered 108.7 millions shares Wednesday, compared to 162.1 million shares total. Parts of the offer were already outsubscribed by employees and policyholders.
The initial public offering of LIC was a success despite the fact that the stock market (.NSEI), fell 2.3% following an unexpectedly higher interest rate increase by the Reserve Bank of India to curb inflation.
Yesha Shah, Samco Securities’ director of equity research, stated that “Given the volume issuance, demand seems to be very high.” “While general market sentiment was affected by the RBI rate hike, we believe that it will have a minimal impact on LIC’s IPO… because of the company’s good fundamentals, attractive pricing, and valuation.”
Indian officials hope to raise $2.7 billion. This is just a third increase on their original goal. They will sell a 3.5 per cent stake in India’s largest insurer. It will be valued at $78.52 billion. Dollars.
Employees and retail investors will be able to take a Rs 45 discount on the subscription. LIC policyholders will be eligible for a Rs 60 discount per share
Although there may be an impact on listed earnings, we believe that the IPO will proceed. Shah stated that Thursday will be the real test, as we will see the full effect of the rate increase on the markets.
At Wednesday’s close, shares allocated to policyholders were sold 1.99 times more than employees (1.17 times) and 0.6 times by individual investors (0.6 times).
Sneha Poddar (research analyst at Motilal Oswal Financial Services) stated that LIC’s target value of 1.1x its embedded value is a significant discount compared to private players. This will provide relief for investors.
The issue price range was set at Rs 902 to Rs 949 per share.
The remaining shares will be distributed to eligible institutional buyers at 50%, individual investors at 35%, and non-institutional investors at 15%, subject to policyholder and employee reservations.
LIC shares traded on the “grey market” at a premium Rs 95, or Rs 1,044 each share.
Around 1.2 million Indian field agents were deployed to increase retail investor demand and to draw more than 250 million LIC policyholders across India to purchase shares.
In addition, policyholders received text messages in January recommending that they open an electronic stock holding account in advance to be eligible for the initial public offering.
This week, Rs 949 was charged for each of the 59.3 Million shares that were allocated to major investors. The central book has been joined by the Singapore government and Norges Bank Investment Management, a Norwegian wealth fund.
The government originally wanted the LIC included in the fiscal year that ended March 31. However, the sale was delayed after the Russian invasion and a rate increase by the US Federal Reserve. The market would crash if this happened.
With more than 280 millions of insurance policies, the 66-year-old firm is the dominant player in India’s insurance market. In terms of premium collection, it was the fifth-largest insurer in the world in 2020.