India's biggest IPO starts retail orders as markets stay volatile
Sign up now: Get ST's newsletters delivered to your inbox
The milestone deal for shares of LIC is key for Prime Minister Narendra Modi to achieve his fiscal deficit target.
PHOTO: REUTERS
MUMBAI (BLOOMBERG) - India's largest initial public offering (IPO), expected to fetch 210 billion rupees (S$3.8 billion), started taking orders from individuals 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 (LIC) until May 9.
The milestone deal, slashed by more than half amid volatile markets since the start of 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 six trillion rupees, putting it among the top five on the benchmark S&P BSE Sensex index.
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 per cent 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. Retail investors will be alloted 35 per cent of the stock on sale, and will enjoy a 45 rupee discount on the IPO price.
An additional 10 per cent of the deal has been earmarked for LIC's policyholders, who will get 60 rupees off on each share.
If priced at the upper end of the offer range, the issue is valued at 1.1 times enterprise value, "which is at a significant discount to private sector valuations", analyst Raghav Garg of Nirmal Bang International Equities wrote in a report, recommending to buy shares in the offering.