A majority of LIC’s anchor investor portion has been subscribed by domestic mutual funds with only a handful of foreign portfolio investors (FPIs) featuring in the list of investors disclosed by the insurance company to stock exchanges. Out of 123 anchor investors, 99 are domestic mutual funds accounting for 71.12 per cent of the anchor book portion in the company’s IPO.
“Out of the total allocation of 5,92,96,853 equity shares to anchor investors, as many as 4,21,73,610 equity shares (71.12 per cent) were allocated to 15 domestic mutual funds through 99 schemes,” LIC said in a stock exchange filing on Tuesday.
SBI Equity Hybrid Fund (9.22 per cent), ICICI Prudential Value Discovery Fund (3.91 per cent) and SBI Balanced Advantage Fund (3.64 per cent) have been allocated the largest part in the anchor book portion among mutual fund schemes. ICICI Prudential Mutual Fund, HDFC Mutual Fund, Axis Mutual Fund, Kotak Mutual Fund are a few others that have been allocated shares in the anchor investor quota.
Among the foreign investors, BNP Investments LLC has been allocated 47.41 lakh shares (8 per cent) in the anchor book quota for ₹449.99 crore. Norges Bank Investment Management has been allocated 23.7 lakh shares (4 per cent) and has invested ₹224.99 crore. Government of Singapore has been allocated 15.98 lakh shares for ₹151.67 crore while the Monetary Authority of Singapore has received 4.03 lakh shares for ₹38.32 crore.
FPIs and Indian market
This comes even as FPIs dumped Indian shares worth a record ₹1.4-lakh crore in FY22. This trend continued in April with foreign investors pulling out ₹17,144 crore from the equity market amid global macro-economic fears.
“Foreign investors have been sellers for the last one year. So it is not surprising that they did not put money in the LIC anchor investor quota. They could possibly invest when the IPO opens as that will give them more flexibility to sell depending on the market volatility. Domestic mutual funds have the largest pool of funds. Currently, after adjustment to LIC’s issue price, the pricing is quite reasonable compared to any other private sector player. LIC has become a value stock. It is also a market leader with good growth prospects and so an attractive buy for mutual funds,” said Alok Singh, Chief Investment Officer, BOI AXA Mutual Fund.
Arun Kejriwal, Founder, KRIS Capital, said the anchor book does not give any indication of low FPI interest in LIC IPO. “Anchor book allotment is discretionary and it seems like a conscious call by the bankers and government to give more stake to domestic investors. Still, there are big sovereign wealth investors in the anchor book. Just wait for the QIB placement, the current strategy may ensure that FPIs fall over each other. LIC is India’s sovereign wealth fund and the demand will be robust. Also, this is the first IPO where the subscription has been kept open on Saturday and time has been extended till 7 pm,” Kejriwal said.
Long-term potential
“Contrary to the negative perception that FPIs have not shown interest, the thinking within the government seems clear that they want long-term funds as anchor investors. Hence, the allotment has gone mainly to global pension funds, sovereign wealth funds, insurance companies and so on. Government’s policy will ensure that there remains strong interest in LIC shares during the follow-on public offer and further dilution of stake. In fact, the maximum number of retail investors will be given allotment in the IPO,” said Deven Choksey, MD, KR Choksey Investment Managers.
Experts pointed out that LIC has very strong long-term potential, given its market share and the scope for insurance in the company. “LIC is a highly profitable entity and insurance is underpenetrated in India and the market is expanding. Insurance premium continues to grow anywhere in the range of 11 to 12 per cent per annum. From the perspective of any institutional investor, any business that grows at such a pace is very good. LIC is a good, long term story,” said Raghvendra Nath, Managing Director, Ladderup Wealth Management, adding that he expects the IPO to do very well.
Issue opens today
The life insurance behemoth raised a total of ₹5,627 crore from 123 anchor investors. Societe Generale, HCL Corporation, Tata Investment Corporation, Bajaj Allianz General Insurance, Reliance General Insurance, schemes of the NPS Trust have also invested in the anchor investor portion.
The government is set to sell 22.13 crore shares, comprising 3.5 per cent stake in LIC, and will raise about ₹21,000 crore. This IPO, the biggest issue in the country till date, is set to open for investors’ subscriptions between May 4 and 9. The price band has been fixed at ₹902 to ₹949 per equity share. According to sources, the share is currently quoting at around ₹45 to ₹50 premium in the grey markets.