The initial public offering (IPO) of India’s largest life insurer Life Insurance Corporation of India (LIC) closed for subscription on May 9. The biggest float in the history of Indian primary market was a success getting oversubscribed 2.95 times with bids worth Rs 45,000 crore being made across investor categories.
The strongest response came from LIC policyholders who lapped up their quota 6.12 times. In fact, experts say that all the credit must go to the policyholders as they were the major driving force behind the over-subscription, accounting for 60 percent of applications.
Robust response was also received from employees whose quota was subscribed 4.40 times. The portion for retail investors was subscribed 1.99 times. The non-institutional category witnessed 2.91 times subscription while qualified institutional buyers’ category saw subscription of 2.83 times.
The issue was an offer for sale of up to 221,374,920 shares equivalent to 3.5 percent stake of the government.
“LIC IPO received phenomenal participation from retail investors as anticipated and the marginally higher discount offered to eligible policyholders was one of the reasons for the issue being subscribed 6x in their quota,” said B Gopkumar, MD and CEO of Axis Securities. "We have seen this IPO acting as a stimulus in driving retail participation in equity markets.”
According to data shared by Axis Securities, which received substantial applications for the IPO, over 97 percent of participation came from domestic investors, of which females contributed 26 percent of the subscription. Top three contributing states were Maharashtra, West Bengal, and Gujarat, in that order.
“We continue to believe that the LIC IPO will be a good long-term bet and will play well on the growth story of the underpenetrated insurance industry,” added Gopkumar.
The IPO generated a lot of euphoria from the time it was announced during the previous financial year and there was a mad rush among investors to open demat accounts so as to be able to apply for the issue.
"On Paytm Money, we saw a surge in new account openings by 200 percent during the LIC IPO with a majority of accounts opened by first-time investors under 30 years of age,” said Varun Sridhar, CEO - Paytm Money.
Prevailing volatility dented market sentiments and the LIC IPO couldn’t escape this with its grey-market premium plummeting 100 percent from Rs 60 on May 7 to Rs 30 on May 10, as per IPO Watch. This implies a listing gain of mere three percent.
According to a report by Motilal Oswal Financial Services on the insurance sector for the month of April, LIC reported growth of 27.8 percent year on year (11.5 percent in March) in individual weighted received premium (WRP) whereas for private players it grew 46 percent in April (12.2 percent in March) while the industry posted growth of 38.7 percent.
Individual WRP market share for private players expanded 300 basis points month on month to 63.1 percent in April while LIC’s share stood at 37 percent.
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