Forex market hopes to see foreign investors pump $1 billion into LIC public issue

The much-awaited initial public offering of the Life Insurance Corporation of India finally kicked off on May 4 with the government hoping to mop up Rs 21,000 crore over the next four days.

The government had earlier aimed to raise more than Rs 50,000 crore from the IPO at a likely valuation of more than two times the insurer’s embedded value.

While the interest from retail investors and LIC’s own policyholders running high in the initial round of bidding for the paper today, the cohort key to the success of the IPO will be foreign institutional investors.

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The company has kept aside 39.5 million shares for qualified institutional buyers in the public issue, besides the more than 59 million shares offered to institutional investors during the anchor allotment.

The foreign exchange market is abuzz with the possibility that the public issue of the world’s third largest life insurer in terms premium could attract as much as $1 billion in inflows from foreign investors.

“I think we will see close to $1 billion in inflows directed towards the LIC IPO by the end of the issue,” a forex dealer with a city-based bank told Moneycontrol on condition of anonymity.

Around 12.30pm, the IPO was subscribed over 30 percent, with the policyholders' quota being fully subscribed and 43 percent buying in the employees’ portion.

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The reception of the IPO by foreign investors has been muted so far. The anchor portion of the IPO saw only 18.08 percent of the more than 59 million shares on offer, the lowest for an anchor book of a life insurance company that went for an IPO in India. So far, the initial public offering has failed to attract any bids from foreign investors on the National Stock Exchange and BSE in the first two hours of its opening.

“The anchor book worth of Rs 5,627 crore got a good response but the grey market still is suggesting only 8-10 percent premium. Markets seem to be awaiting for the Fed policy decision and its stance going ahead tonight before moving aggressive in the domestic equity market front,” Kunal Sodhani, Assistant Vice President, Global Trading Center, Shinhan Bank India, told Moneycontrol over the phone.

Dealers said that foreign investors are in a wait-and-watch mode to appraise the impact of the impending interest rate hike by the US Federal Reserve, which is likely to be announced later on May 4.Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.