LIC IPO: Domestic Mutual Funds Subscribe 71.1% Of Anchor Book

(From left) MR Kumar, chairman of LIC; Sanjay Malhotra, secretary of India's Department of Financial Services, and Tuhin Kanta Pandey, secretary of DIPAM, during a news conference in New Delhi. (Photographer: T. Narayan/Bloomberg)

Life Insurance Corp.'s maiden offer is betting on domestic liquidity to sail through as India's largest IPO launches on Wednesday.

The nation's biggest insurer has raised Rs 5,627.27 crore from anchor investors, 71.1% of which was subscribed by domestic mutual funds, according to a circular issued by the Bombay Stock Exchange.

Of about 27% of its initial public offer or 60% of the qualified institutional buyer portion was set aside for anchor investors. A total of 5.92 crore shares have been allotted to 123 anchor investors at Rs 949 apiece—the upper end of the price band.

Anchor investors are large institutions roped in to generate demand ahead of an IPO.

The Rs 21,008-crore offer saw 99 entities belonging to 15 mutual funds. The anticipated large-scale participation of foreign portfolio investors was missing.

Among the FPIs who came in as anchor investors are Government Pension Fund Global, Government of Singapore, Monetary Authority of Singapore, BNP Investments LLC. Among the major domestic mutual funds that participated include various entities of SBI Mutual Fund, HDFC Mutual Fund, ICICI Prudential Mutual Fund. The other government entities included NPS Trust managed by SBI and UTI.

The offer will open for subscription on May 4 and close on May 9. The anchor book was supposed to be completed on May 2 but was released in the early hours on May 3.

The initial share sale comprises a 3.5% stake sale of 22.14 crore equity shares by the Indian government. That's down from the earlier planned divestment of 5%, expected to fetch the government close to Rs 70,000 crore.

The IPO size was reduced as the geopolitical tensions and foreign selloff caused its valuation to drop. Still, Tuhin Kanta Pandey, secretary at the Department of Investment and Public Asset Management, in a media conference last week termed the revised price “a fair and attractive valuation”.

The price band has been set at Rs 902-949 apiece. Employees and retail investors would be entitled to a discount of Rs 45 a share, while policyholders would be offered a discount of Rs 60 on the issue price.

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