India’s Biggest IPO Starts Retail Orders as Markets Stay Volatile

(Bloomberg) -- India's largest initial public offering, which is expected to fetch 210 billion rupees ($2.7 billion), sold 67% of the issue on day one, after attracting anchor investors including sovereign funds from Norway and Singapore.

Retail investors can place their orders for shares of state-controlled Life Insurance Corporation of India until May 9. The milestone deal, slashed by more than half in size amid the war in Ukraine and rising interest rates worldwide, is key for Prime Minister Narendra Modi to achieve his fiscal deficit target.

Loyal policyholders and retail investors with an emotional attachment to India's oldest insurer are likely to prop up demand for shares in the company, which could be valued at around 6 trillion rupees, putting it among the top five on the benchmark S&P BSE Sensex index.

As of 7 p.m. local time on Wednesday, about 60% of the portion reserved for retail investors had been sold, according to data provided to local exchanges. And the issue kept for policyholders was sold almost two times.

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While the offer attracted wealth funds from Singapore and Norway, the majority of institutional investors are local with 15 domestic mutual funds accounting for 71% of the anchor allocation.

Founded in the late 1950s, LIC was the monopolist for insurance until the government opened up to private competition in 2000. It remains India's largest insurer with sales agents in even the smallest towns in the country of about 1.34 billion people. The 123 anchor investors that joined the deal committed to purchase shares at the top end of a 902- to 949-rupee price range.

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Retail investors will be alloted 35% of the stock on sale, and will enjoy a 45 rupee discount on the IPO price. Of the total issue, 10% has been earmarked for LIC's policyholders, who will get 60 rupees off on each share.

At the upper band of the issue price, LIC shares are being offered at “a significant discount to peers,” said Yesha Shah, the head of equity research at Samco Securities. “Given the attractive valuation, the downside from here seems limited. Further, the fact that a discount has also been offered to retail investors is the cherry on the cake.”