Small-town investors to fuel LIC IPO demand
MUMBAI: Small-town retail investors with an emotional attachment to India’s oldest insurer and its long-loyal policyholders will likely prop up demand for the country’s largest-ever initial public offering, even as jittery markets forced the deal size to be slashed by more than half.
State-run Life Insurance Corporation of India IPO is open from May 4 to May 9 in a listing that could, at the new reduced price range, raise up to $2.7 billion. Russia’s invasion of Ukraine and rising U.S. interest rates are putting foreign funds off emerging market stocks, but investment advisers say the mammoth insurer’s float will likely be lapped up by mom-andpop investors.
“There are IPOs and then there is the LIC share sale. Both are entirely different things,” said Pallav Bagaria, a director at the Pune-headquartered Sapient Wealth Advisors & Brokers Ltd. “The insurer has had an association with an entire generation of people, and they want to buy LIC because they feel it’s their company.”
Founded in the late 1950s, LIC was the country’s only insurer until the government opened up the market to private competition in 2000. It remains India’s largest insurer with a sales agent in almost every neighborhood in even the smallest towns.
Many people who grew up in the 1960s have an “emotional engagement” with LIC, which they view as synonymous with insurance, said Vikaas Sachdeva, chief executive officer at Emkay Investment Managers Ltd.
“There is a fair amount of buzz around the issue of shares given it is a phenomenal brand that has been around for years,” said Sachdeva, who said he has been receiving a barrage of phone calls from his father’s friends and relatives asking about the IPO. He said the government’s decision to scale back the float by making shares cheaper and the deal size smaller has made it “more compelling.”
The government is selling 221.4 million LIC shares at between ₹902 and ₹949 each, which would raise as much as ₹21,000 crore at the top end of the range, far below the ₹50,000 crore target earlier.
Retail investors will be alloted 35% of the total shares in the offer, and given a discount of ₹45 from the IPO price; 10% of the float, meanwhile, has been earmarked for LIC’s policyholders, who will receive a ₹60 discount on each share. The minimum bid lot size is 15 shares, which means a retail investor would have to shell out at least ₹13,560 for a stake. Policy holders have to spend ₹13,335.