LIC IPO takes off: Demand from anchor buyers could be very sturdy

The Life Insurance Corporation (LIC) kicked off its mega IPO course of Monday with the insurer’s anchor ebook getting oversubscribed with bids of over Rs 7,000 crore.

The LIC, which is planning to boost a complete of Rs 21,000 crore by means of the IPO, has aimed to boost Rs 5,630 crore on the higher finish of the value band from anchor buyers. The agency has reserved round 59.29 million shares for the anchor portion. Global funds and home mutual funds have put in bids for the anchor ebook.

An anchor investor in an IPO is a professional institutional purchaser (QIB) like a international portfolio investor or mutual fund or insurance coverage firm which invests earlier than the IPO is made obtainable to the general public as per Sebi rules. As preliminary buyers, they make the IPO course of extra engaging for buyers and instil confidence in them. Anchor buyers additionally assist in worth discovery of the IPO.

Anchor buyers who get assured allotment a day earlier than the IPO opens to the general public are usually allotted 60 per cent of the QIB quota. Companies with a worthwhile observe report can allocate 50 per cent of the IPO to QIBs. The demand within the anchor class is a sign of the success of the IPO, based on analysts.

The LIC has priced the IPO within the vary of Rs 902-949 per share. It has supplied a reduction of Rs 60 for policyholders and Rs 45 for retail buyers and workers.

The problem will open for retail buyers on May 4 — May 3 is a vacation on account of Eid. Investors can bid for at least 15 shares and thereafter in multiples of 15 shares.

The measurement of the IPO was lower from Rs 65,000 crore to Rs 21,000 crore because the Russian invasion of Ukraine and sustained promoting by international buyers despatched the inventory markets right into a tailspin.

The Sebi just lately stated the prevailing lock-in of 30 days will proceed for 50% of the portion allotted to anchor buyers and for the remaining portion, a lock-in of 90 days from the date of allotment will likely be relevant for all points opening on or after April 1. The change within the anchor lock-in guidelines is to keep away from sell-off by anchor buyers. For occasion, shares of One97 Communications, the guardian agency of Paytm, dipped sharply by 13 per cent on the day the necessary lock-in interval for anchor buyers ended.

Meanwhile, analysts expressed optimism in regards to the LIC IPO. “From a valuation standpoint, at the upper band of the issue price, LIC is priced at 1.1x embedded value, which is at a significant discount to peers. 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,” stated Yesha Shah, Head of Equity Research, Samco Securities.