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LIC’s IPO subscribed 67% on first day

Sees strong demand from policyholders, weak response from institutional buyers
Last Updated : 04 May 2022, 15:37 IST

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Life Insurance Corp’s initial public offering was subscribed 67% on the first day of bidding, even as a surprise rate hike by the Reserve Bank of India sent markets into a frenzy.

The policyholder and employee portions of India's largest IPO were oversubscribed and about 60% of the portion reserved for retail investors had been sold, data from the stock exchanges showed.

The IPO, which is expected to fetch Rs 21,000 crore, however got a tepid response from qualified institutional buyers and non-institutional investors.

Analysts are divided on the IPO, which will take subscriptions even on Saturday, an unusual move aimed at wooing investors. The insurance behemoth's IPO is open till May 9. While the price band for the IPO is between Rs 902 and Rs 949, policyholders get a discount of Rs 60 and employees get a discount of Rs 40.

Analysts are divided on the IPO, which has attracted anchor investors including sovereign funds from Norway and Singapore.

"Anchor investor subscription looks encouraging and positive. Investors should subscribe to the IPO as it is priced attractively", said Narendra Solanki, Head Fundamental Research-Investment Services, Anand Rathi Shares and Stock Brokers Limited.

Some others looked at LIC as an investment option for long-term investors due to certain risks.

"LIC is synonymous with insurance in India and enjoys a huge competitive advantage in terms of brand value, huge network of agents and behemoth scale. However, there are concerns with the company like losing market share to private players, lower profitability and revenue growth compared to private players, lower VNB (value of new business) margins and short-term persistency ratios,” said Santosh Meena, Head of Research, Swastika Investmart Ltd.

Persistency ratio shows the number of policyholders who paid their renewal premium and is a reflector of future growth for insurers.

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Published 04 May 2022, 10:01 IST

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