LIC IPO | Insurance giant reserves up to 35% of issue size for retail investors

LIC IPO

Life Insurance Corporation of India has reserved up to 35 percent of its total IPO size for retail investors as per the draft papers filed with the capital markets regulator Sebi.

The life insurance giant is expected to launch its IPO of Rs 31.62 crore equity shares in the month of March. It is a complete offer for sale by the Government of India which owns 100 percent shareholding in the company.

In most of IPOs launched since the pandemic, retail investors seem to be looking most excited about IPOs as they have always been ahead in terms of putting in bids. In fact, they have been playing a big supportive role for the primary as well as secondary markets for last more than one-and-half-year.

Also read - LIC IPO: Govt files draft papers with SEBI for mega listing; All eyes on March launch

Experts feel in very short period of time, the number of demat accounts opening in India ahead of LIC IPO launch are expected to be significant and if that happens then the revenue of government through securities transaction tax (STT) may also increase.

"It is expected to hit the market soon that may bring at least 1 crore new demat accounts and that could be a big positive for the dynamics of the Indian market because if 10 percent of these investors become active then it will increase participation of retail investors and it will also help the government to generate revenue through STT," said Santosh Meena, Head of Research at Swastika Investmart.

Also read - LIC IPO | Company 8th largest life insurer in terms of assets among global peers

Apart from positive aspects, there could be some negative impact on the secondary market as it may suck out the liquidity from the secondary market, he added.

Half of the offer size is reserved for qualified institutional buyers and the 15 percent is booked for non-institutional investors.

Further the corporation may, in consultation with the merchant bankers, allocate up to 60 percent of the QIB portion to anchor investors on a discretionary basis, of which one-third will be reserved for domestic mutual funds.

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"In the event of under-subscription, or non-allocation in the anchor investor portion, the balance equity shares shall be added to the net QIB portion," said LIC in its DRHP.

Further, 5 percent of the net QIB portion will be available for allocation to mutual funds, and the remainder of the net QIB portion will be available for allocation on a proportionate basis to all QIBs including mutual funds.

Equity shares are proposed to be listed on the BSE and National Stock Exchange of India.

Also read - LIC IPO: Key points regarding allocation to anchor investors

The government has appointed Kotak Mahindra Capital Company, Axis Capital, BofA Securities India, Citigroup Global Markets India, Goldman Sachs (India) Securities, ICICI Securities, JM Financial, JP Morgan India, Nomura Financial Advisory and Securities (India) and SBI Capital Markets as merchant bankers for LIC IPO.

Also read - LIC IPO | Read here the key highlights of draft papers