Explained in charts: The true story behind the rush for LIC’s anchor book
Mutual funds, global investment firms, National Pension Schemes, and other insurance companies made a beeline to subscribe to LIC IPO’s anchor book. But investors were chosen with care
The initial public offer (IPO) of Life Insurance Corporation of India (LIC), the biggest in the history of the Indian capital market, is open for subscription on May 4. The Government of India is aiming to garner Rs 21,000 crore at the upper end of the price band by liquidating 3.5 percent of its stake in the insurance behemoth. Of these, LIC reserved Rs 5,630 crore from anchor investors on May 2, diluting about 59.3 million shares to 123 investors at Rs 949 apiece. Marquee investors, domestic mutual fund companies, domestic insurance companies, corporates and NPS were part of the anchor allotment. Here is the complete story, explained lucidly through charts, on how the anchor portion of LIC IPO was allotted to the different types of investors.
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Out of the total allocation, 71.12 percent of the total anchor book was allocated to domestic mutual funds. Global investment firms were allotted around 18 percent. The anchor book with a selected number of investors implies that the government has decided to choose investors who will act responsibly and judiciously. Shyam Sekhar, founder of Chennai-based wealth management firm ithought Financial Consulting LLP says, “the government has decided to allot to the more stable AMCs and those investors who follow more stable investment pattern. It has allotted to investors who will be stable owners of this equity over the next one year. The government seeks stability through this IPO for the shareholders of the company”.
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Though there was a dominance of domestic participation, big global sovereign wealth investors were too part of the anchor book. SBI mutual fund tops the list of anchor book followed by HDFC and ICICI Prudential mutual funds. Global investors like BNP Investments LLC and Government Pension Fund Global were also allocated a significant portion of the anchor portion.
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Out of the total allocation, 71.12 percent of the total anchor book were allocated to 15 domestic mutual funds through 99 schemes with a total value of Rs 4,002 crore. The LIC IPO has found takers among institutional investors including mutual funds due to valuation of the IPO, resizing of the issue and LIC's intent to become more digital-oriented, according to fund managers. Top AMCs that received a significant portion were SBI, ICICI Prudential, HDFC, Aditya Birla and Axis mutual fund.
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The stock of LIC is considered a value stock and more value-oriented funds showed interest to pile up the stock. Of the 99 schemes, 67 equity funds got the LIC shares with an investment value of Rs. 2,361 crore. ICICI Prudential Value Discovery, SBI Blue Chip Fund, and ICICI Pru Bluechip Fund were among them. On the hybrid side, schemes that got notable allocation include SBI Equity Hybrid Fund, SBI Balanced Advantage Fund and HDFC Balanced Advantage Fund.
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Despite foreign investors turned net sellers in the Indian equity market over the last one year, Marquee investors who participated in the anchor book included Government of Singapore, Government Pension Fund Global and BNP Investments LLC. More foreign participation may be likely once the IPO opens as they will get flexibility to sell depending on the market volatility.
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It seems the government preferred allocating the anchor portion only to the state-run NPS players. The total value of the LIC shares allocated to them was Rs 175 crore.
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Four life insurance companies and two general insurance companies got allocation in the LIC IPO’s anchor book. Two corporates, HCL Corporation and Tata Investment Corporation, were also part of the anchor book and received LIC shares worth Rs 100 crore and Rs 50 crore respectively.
