Anchor book in Rs 21k cr LIC IPO gets fully subscribed

MUMBAI: The anchor allocation part for the maiden offer for life insurance major LIC, worth about Rs 5,600 crore was fully subscribed on Monday evening with the total demand for its shares for large institutional investors much bigger than the number of shares on offer, sources said.

Till late in the evening the details of the allotment were not uploaded on the bourses. LIC’s is the first divestment offer to have an anchor book. Through an anchor allocation, some select, marque investors of global and domestic repute are allotted about 35% of the total offer a day ahead of the opening of the issue.

Till now the government was not willing to give preferential treatment to a handful of investors ahead of the opening the IPO to all types of investors. Through this IPO, the government is selling 22.1 crore shares of the life insurance major at a price band of Rs 902-949-per-share, aiming to raise about Rs 21,000 crore. This will be the largest IPO in the history of the Indian capital market, ahead of the Rs 18,300-crore PayTM IPO that closed last November.

The issue would open on May 4 and close on May 9. Retail investors will get a Rs 45-per-share discount on the offer price while LIC’s policyholders will get a discount of Rs 60. Of the about 22.13 crore LIC shares being sold by the government through the IPO, nearly 10 crore shares are reserved for institutional investors, about 3 crore shares for non-institutional buyers (high networth investors) and about 2.2 crore shares are reserved for its policyholders. The life insurance major is expected to be listed on the bourses on May 17.

Earlier in February this year, finance ministry officials had told TOI that the government was looking at a valuation of Rs 13-14 lakh crore. However, after the start of the Russia-Ukraine war and the subsequent fall in the market, the government drastically reduced the valuation of the company by less than half the earlier level. At the current IPO size, LIC’s valuation is pegged at about Rs 6 lakh crore.

LIC’s embedded value, the most accepted valuation metric for insurance companies, was pegged at about Rs 5.4 lakh crore as of September 30, 2021. The valuation was done by international actuarial firm Milliman Advisors. While all the listed Indian private life insurance players are commanding a valuation of between 2.5 times to 3.5 times their embedded value, at the IPO price, LIC’s is 1.1 times. According to some analysts this makes the IPO price attractive.