LIC IPO subscribed 1.38x on Day 3; grey market premium declines by nearly 50%

The maiden public offer of Life Insurance Corporation (LIC) was subscribed 1.38 times on the third day, garnering bids for 221 million shares, against 162 million shares on offer. The issue was fully subscribed on Thursday itself. Out of the total five categories, the portion set aside for retail investors, policyholders and employees, which aggregates to more than Rs 8,500 crore of the total issue size, was subscribed fully by the end of the third bidding day on Friday.

Policyholders and employees have reposed faith in the company by betting big on the issue. The portion set aside for policyholders and employees was subscribed 4.01 and 3.06 times, respectively, till Friday. On the other hand, the quota for retail investors witnessed 1.23 times subscription.

Demand from qualified institutional buyers and non-institutional investors continued to remain tepid. According to data available on the exchanges, NIIs bid for 76% of the total shares reserved, while the quota for QIBs was subscribed 56% so far.

However, the grey market premium for LIC on Friday declined by nearly 50% that what it was before the issue kicked off. According to analysts tracking the grey market, the premium for LIC fell to Rs 42 on Friday. Analysts believe that the sharp sell-off in the secondary market is denting the grey market premium.

In an unusual move to draw more investors, bids will be accepted on Saturday and Sunday as well between 10 am and 7 pm. The RBI vide its circular dated May 4 had recommended that all bank branches designated to handle ASBA applications be kept open to public on Sunday, May 8.

The insurer’s share sale with a price band of Rs 902-949 will end on May 9 and the company will list on the bourses on May 17. The IPO is the fifth-biggest in the world in calendar year 2022, as it aims to raise Rs 21,000 crore by a 3.5% stake dilution.

As of the nine months ended December 31, 2021, LIC had a market share of 61.6% in terms of premiums or GWP, 61.4% in terms of new business premium (or NBP), 71.8% in terms of number of individual policies issued, and 88.8% in terms of number of group policies issued.