Biggest Indian IPO to date oversubscribed by nearly three times
INDIA’S $2.7 billion (£2.2bn) initial public offering (IPO) of insurance giant LIC was oversubscribed by nearly three times when bids were closed on Tuesday (10), exchange data showed, as small investors bid enthusiastically for the country’s biggest IPO to date.
Prime minister Narendra Modi’s government is desperate for proceeds from the sale of 3.5 per cent of its stake in Life Insurance Corporation of India (LIC) and other state assets to help fix tattered public finances.
The long-awaited IPO – delayed since March due to market volatility – opened last Wednesday (4) and closed for bids on Monday (9).
But the issue was already 103 per cent subscribed by the end of its second day, with the categories for employees and policyholders receiving double and triple the bids compared to the shares reserved.
The government is selling 221 million shares within a price band of `902 to `949 (£9.46 to £9.95). The insurer is offering a `60 (63p) discount to policyholders, for whom 10 per cent of shares are reserved, and a `45 (47p) discount to employees and other small investors.
The category for small “retail” investors – for whom 35 per cent of shares are reserved – was 93 per cent subscribed by the end last Thursday.
Ministers hope LIC’s IPO will attract legions of first-time investors to the stock market, in a country where less than five per cent of its 1.4 billion population has trading accounts.
About 6.48 million policyholders completed the formalities necessary to take advantage of the discount ahead of the IPO, a government official said.
The portions reserved for large investors such as foreign and domestic institutions and high networth individuals were less than 50 per cent subscribed by the end last Thursday.
The IPO is a crucial step in Modi’s policy to “monetise and modernise” state-run companies and plug an estimated `16.6 trillion fiscal deficit this financial year.
Founded in 1956 by nationalising and combining 245 insurers, LIC was for decades synonymous with life insurance in post-independence India, until the entry of private companies
in 2000. It continues to lead the pack with a 61 per cent share of the life insurance market in India, with its army of 1.3 million “LIC agents” giving it huge reach, especially in rural areas.
But LIC’s market share has declined steadily in the face of competition from net-savvy private insurers offering specialised products.