Foreign institutional investors have on the whole steered clear of India’s biggest share sale, deeming it too expensive given currency risks and the global market backdrop.
The non-institutional investors’ portion was subscribed 1.38 times. Retail individual investors bid for 11.89 crore shares as against 6.9 crore shares set aside for this segment — translating into an oversubscription of 1.72 times
Of the total, the policyholders’ portion was subscribed 5.39 times, while that for employees was subscribed 4 times
Mumbai:
Shares reserved for Qualified Institutional Buyers (QIB), including banks and mutual funds in the LIC’s public offer were subscribed fully on Monday morning, taking the overall subscription of the issue to a little over 2 times.
Against 3,95,31,236 reserved, 4,61,62,185 bids were received, reflecting a subscription of 1.17 times, according to data posted on stock exchanges at 12:12 pm.
However, foreign institutional investors have on the whole steered clear of India’s biggest share sale, deeming it too expensive given currency risks and the global market backdrop.
With just hours to go until the end of the subscription period for the $2.7 billion initial public offering of LIC, foreign institutional funds have put in orders for merely 8% of the shares set aside for all institutional buyers.
“Foreign institutional investors have been pulling out heavily in the secondary market since October. The Fed rate hike and the recent slide in the rupee against the dollar further enhances risks of currency depreciation that can erode their asset price gains in India,” said Vidya Bala, head of research and co-founder at Chennai-based Primeinvestor.in.
The muted international investor interest stands in sharp contrast to some of last year’s Indian IPOs. One97 Communications Ltd., which operates digital payments firm Paytm, drew in the likes of BlackRock Inc., Canada Pension Plan Investment Board and Teacher Retirement System of Texas, among many others, for its 183 billion rupee share sale last year. Food delivery platform Zomato Ltd. was similarly popular among foreign investors.
However those buyers have been left nursing losses as enthusiasm over India’s tech boom waned after some flops. Paytm sank 27% on its debut and is now trading 74% below its offer price. Zomato had a strong debut last summer but has since lost 20% in value.
Investors have also had concerns about LIC’s ability to keep market share as private insurers like HDFC Life Insurance Co. Ltd. and SBI Life Insurance Co. Ltd. expand. The private sector has been on an aggressive expansion spree during the pandemic, growing new individual policy premiums while LIC struggles.
“Foreign institutional investors generally, have never been big on state-run companies as it is very difficult to make money off them,” said Abhay Agarwal, fund manager Piper Serica Advisors Ltd.
“For LIC too the government was unable to convincingly communicate to global investors that the insurer will prioritize the interest of shareholders and won’t function merely as a government entity,” he said.
While the anchor portion of the IPO drew in sovereign funds from Norway and Singapore, most of the shares went to domestic mutual funds.
The noninstitutional investors’ portion was subscribed 1.38 times. Retail individual investors bid for 11.89 crore shares as against 6.9 crore shares set aside for this segment — translating into an oversubscription of 1.72 times.
Of the total, the policyholders’ portion was subscribed 5.39 times, while that for employees was subscribed 4 times.
The overall LIC issue was subscribed 2.05 times. Against 16,20,78,067 shares on offer, 33,19,04,280 bids were received. LIC has fixed the price band at Rs 902-949 per equity share for the issue.
The offer includes a reservation for eligible employees and policyholders. The retail investors and eligible employees will get a discount of Rs 45 per equity share, while policyholders will get a discount of Rs 60 per share.
With the public offer which closes later in the day, the government aims to generate about Rs 21,000 crore by diluting a 3.5 percent stake in the insurance behemoth.
LIC reduced its IPO size to 3.5 percent from 5 percent decided earlier due to the prevailing choppy market conditions. Even after the reduced size, LIC IPO is going to be the biggest initial public offering ever in the country.
So far, the amount mobilized from the IPO of Paytm in 2021 was the largest ever at Rs 18,300 crore, followed by Coal India (2010) at nearly Rs 15,500 crore and Reliance Power (2008) at Rs 11,700 crore.
Agencies