The initial public offering (IPO) of Life Insurance Corporation of India (LIC) was fully subscribed on Thursday, with policyholders, employees and retail investors on top of the investor queue.
Investors have bid for over 16.68 crore shares against 16.20 crore shares on offer, a subscription ratio of 1.03 times. The policyholders’ portion was subscribed over 3.11 times and the employee portion subscribed 2.21 times.
Qualified institutional buyers showed greater interest than the first day, with their portion subscribed 40 per cent of the quota. The non-institutional investor segment was subscribed 47 per cent.
These investors usually subscribe on the last day of the issue. Given their response so far, market circles expect a strong overall subscription number when the IPO closes on May 9.
Retail investors have bid for 6.45 crore shares against 6.91 crore shares reserved for this segment. Both the Securities and Exchange Board of India and the Reserve Bank of India have announced relaxations that will result in higher subscription.
The RBI said in a circular that on a request by the government, it has directed all bank branches that process ASBA (Application Supported by Blocked Amount) to remain open on Sunday, May 8. Usually, bidding to an IPO does not happen on a Sunday.
ASBA is the process wherein the application money of an investor to an IPO is blocked. The money is only debited if the application is selected for allotment.
LIC reduced its IPO size to 3.5 per cent from 5 per cent decided earlier due to the prevailing choppy market conditions. Even after the reduced size of about Rs 20,557 crore, LIC IPO is going to be the biggest initial public offering ever in the country.
So far, the amount mobilised from the IPO of Paytm in 2021 was the largest ever at Rs 18,300 crore, followed by Coal India (2010) at nearly
Rs 15,500 crore and Reliance Power (2008) at Rs 11,700 crore.
One of the factors behind the IPO’s success is the reasonable valuation of LIC. At the upper price band of Rs 949 per share, the corporation is valued at 1.1 times its embedded value (EV) on September 2021, lower than its private sector peers.
