Good News For India – Foreigners’ Last-Minute Dash For LIC IPO

By the end of the bidding, the share of foreign investors was oversubscribed by almost three times.

Foreign institutional investors raised their bids for India’s biggest share sale in the last hours before the close of subscriptions on Monday, shunning currency risks and global market uncertainties.

Foreign investors placed orders for 61 per cent of the shares set aside for institutional buyers in the $2.7 billion initial public offering of Life Insurance Corporation of India, according to exchange data. This portion was oversubscribed almost three times by the end of the bidding. The issue opened on May 4 and received bids by the weekend.

While the anchor portion of the IPO also attracted sovereign funds from Norway and Singapore, the majority of the shares went to domestic mutual funds.

“This shows that the potential of our domestic investors and markets has increased significantly,” Tuhin Kanta Pandey, secretary, department of disinvestment in the finance ministry, told a briefing in New Delhi. “We can run our capital markets without relying on foreigners, although they are also welcome.”

Dubbed India’s “Aramco moment” in reference to the $29.4 billion listing of Gulf oil giant Saudi Arabian Oil Company in 2019 – the world’s largest – LIC’s float not only largely but also in its dependence on the Aramco IPO sees like. Some foreign buyers considered it too costly over domestic investors.

To take advantage of the boom in retail investment in India, LIC has been trying to spur interest in newspaper advertisements since the beginning of the year.

India’s government cut fundraising for the IPO by nearly 60% as the war in Ukraine shook markets, eroding risk appetite, while rising US interest rates kept foreign investors away from emerging market stocks. doing away. It also cut the valuation of the country’s oldest insurer, at the top of the price range, to Rs 6 lakh crore ($77 billion).

“LIC is not only the largest insurance company but also the largest local investor in India. In a way it is a proxy for the development of the country,” said Jigar Shah, Mumbai-based strategist at Kim Ing Securities Pvt Ltd. “The IPO was priced very intelligently, making it attractive to investors that would otherwise be difficult to get such a response given the market turmoil on a global scale.”

a bunch of local people

While foreign investors gathered momentum on the last day itself, retail buyers are gathering since the issue opened for subscription. Stock exchange data shows that policyholders placed bids for more than six times the shares reserved for them, while the employee share received orders for four times the amount available. Retail investors and policyholders will receive a discount on the offer price.

Overall, the IPO has received orders for nearly three times the number of shares on offer. The tranche for non-institutional investors, which includes corporates, was bid nearly three times.

Still, interest from international investors is low compared to some of the Indian IPOs in the past year. One97 Communications Ltd., which operates digital payments firm Paytm, attracted BlackRock Inc., Canada Pension Plan Investment Board and Teachers Retirement System of Texas, among others, for its Rs 18,300-crore share sale last year. Food delivery platform Zomato Ltd. It was similarly popular among foreign investors.

However, those buyers have been left nursing losses as enthusiasm over India’s tech boom followed a few flops. Paytm recorded a drop of 27% in its debut and is now trading 74% below its offer price. Zomato had a strong start last summer but has since lost 20% in value.

Investors are also concerned about LIC’s ability to retain market share as private insurers such as HDFC Life Insurance Company and SBI Life Insurance Company expand. The private sector has been on an aggressive expansion spree during the pandemic, with new individual policy premiums rising while LIC is struggling.

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