NEW DELHI: India’s record US$2.7 billion (RM11.7 billion) initial public offering (IPO) of insurance giant LIC was oversubscribed by yesterday, exchange data showed, as small investors bid enthusiastically for the country’s biggest IPO to date.
Prime Minister Narendra Modi’s government is desperate for proceeds from the sale of 3.5% of its stake in Life Insurance Corporation of India and other state assets to help fix tattered public finances.
The long-awaited IPO – delayed since March due to market volatility – opened on Wednesday and will close for bids on May 9. But the issue was already 103% subscribed by the end of its second day, with the categories for employees and policyholders receiving double and triple the bids compared to the shares reserved.
The government is selling 221 million shares within a price band of 902 to 949 rupees (RM51.41 to RM54.09).
The insurer is offering a 60 rupee discount to policyholders, for whom 10% of shares are reserved, and a 45 rupee discount to employees and other small investors.
The category for small “retail” investors – for whom 35% of shares are reserved – was 93% subscribed by the end of yesterday.
The government hopes LIC’s IPO will attract legions of first-time investors to the stock market, in a country where less than 5% of its 1.4 billion population has trading accounts.
6.48 million policyholders completed the formalities necessary to avail of the discount ahead of the IPO, a government official said.
The portions reserved for large investors such as foreign and domestic institutions and high networth individuals were less than 50% subscribed by the end of yesterday.
The IPO is a crucial step in Modi’s policy to “monetise and modernise” state-run companies and plug an estimated 16.6 trillion rupee fiscal deficit this financial year.
Founded in 1956 by nationalising and combining 245 insurers, LIC was for decades synonymous with life insurance in post-independence India, until the entry of private companies in 2000.
It continues to lead the pack with a 61% share of the life insurance market in India, with its army of 1.3 million “LIC agents” giving it huge reach, especially in rural areas.
But LIC’s market share has declined steadily in the face of competition from net-savvy private insurers offering specialised products.
Moody’s Investors Service said LIC’s IPO was credit-positive for India’s life insurance industry as the listing will drive transparency and competitiveness in a sector dominated by the state-run insurer, which has more than 280 million policies.
However, the rating agency also said the benefits from the IPO will be limited until the government sells a substantial stake in the company, that has nearly 65% market share. – AFP, Reuters
