Foreign institutional investors show strong support for India’s largest IPO
Foreign institutional investors stepped up their bids for India’s biggest initial public offering in the last hours before the close of subscriptions on Monday, shunning currency risks and global market uncertainty.
Overseas investors put in orders for 61 per cent of the shares set aside for institutional buyers in the $2.7 billion listing of Life Insurance Corporation, data from the exchanges showed.
The portion was oversubscribed by about three times by the end of the bidding.
The issue opened on May 4 and received bids throughout the weekend.
While the anchor portion of the IPO also drew in sovereign funds from Norway and Singapore, most of the shares still went to domestic mutual funds.
“This shows that the capacity of our domestic investors and markets has gone up considerably,” said Tuhin Pandey, secretary of the divestment department in India’s finance ministry. “We can run our capital markets without being dependent on foreigners, though they are also welcome.”
Called India’s “Aramco moment” in reference to Gulf oil company Saudi Aramco’s $29.4bn listing in 2019, the world’s largest, the float of LIC has ended up resembling the Aramco IPO – not only in scale but also in its reliance on domestic investors after some foreign buyers deemed it too expensive.
LIC has been seeking to drum up interest with newspaper advertisements since the start of the year, seeking to take advantage of a retail investment boom in India.
The country’s government cut the fund-raising of the IPO by about 60 per cent as the war in Ukraine affected markets, denting risk appetite. Rising US interest rates have also affected the interest of foreign investors in emerging market stocks.
New Delhi also cut the valuation it is seeking for the country’s oldest insurer, which would be worth 6 trillion rupees ($77bn) at the top of the price range.
“LIC is not only the largest insurance company but also the largest local investor in India. In a way, it is a proxy for the country’s growth,” said Jigar Shah, a Mumbai-based strategist with Kim Eng Securities.
“The IPO was priced very wisely, making it attractive for investors, otherwise it would be difficult to get such response, given market turbulence globally.”
While foreign investor orders picked up pace only on the last day, retail buyers have been piling in since the issue opened for subscription.
Policyholders placed bids for more than six times the shares reserved for them, while the employee portion received orders for four times the amount available, stock exchange data showed.
Retail investors and policyholders will receive discounts on the offer price.
Overall, the IPO has received orders for about three times the shares on offer.
Bids for the tranche for non-institutional investors, which includes corporates, were about three times over.
Still, the interest of international investors pales in comparison to some of last year’s Indian IPOs.
One97 Communications, which operates digital payments company Paytm, drew in companies such as BlackRock, the Canada Pension Plan Investment Board and the
Teacher Retirement System of Texas during its 183bn-rupee IPO last year.
Food delivery platform Zomato was similarly popular among foreign investors.
However, those buyers have been left nursing losses as enthusiasm over India’s technology boom waned after some flops.
Paytm sank 27 per cent on its market debut and is now trading 74 per cent below its offer price. Zomato had a strong debut last summer but has since lost 20 per cent in value.
Investors have also had concerns about LIC’s ability to keep market share as private insurers such as HDFC Life Insurance and SBI Life Insurance expand.
The private sector has been on an aggressive expansion spree during the Covid-19 pandemic, with their new individual policy premiums growing at a time when LIC has been struggling.
Overseas investors put in orders for 61% of the shares set aside for institutional buyers in the $2.7bn listing of LIC