The initial public offer (IPO) of Life Insurance Corporation of India (LIC) has opened for anchor investors today. Usually, an IPO is open for anchor investors a day before the issue opens but since the IPO will open on May 4 and the Indian stock market is closed on May 3 on account of Id-Ul-Fitr, anchor investors have been allowed to bid for the share sale today. LIC plans to raise up to Rs 5,630 crore at the upper end of the price band from the anchor investors.
The state-run insurer has reserved 59.29 million shares for anchor investors. The Sebi has allowed LIC to sell 3.5 per cent stake or 22,13,74,920 shares in the insurer through the IPO. Earlier, the government planned to sell 5 per cent stake in the IPO but trimmed the share sale to 3.5 per cent due to volatile market conditions.
The IPO will open for public from May 4 to May 9. The insurer plans to raise Rs 21,000 crore from investors. Shares of LIC will be sold in a price band of Rs 902- Rs 949. At the upper end of the price band, the insurer is likely to command a market cap of Rs 6 lakh crore.
According to IPO Watch, shares of LIC command a premium of Rs 85 in the grey market, signaling a 9 per cent gain on the listing day. The allotment of shares will be done on May 12, 2022. Lot size of the IPO is 15 shares for which one will have to spend Rs 14,235. A retail individual investor can apply for up to 14 lots or 210 shares by spending Rs 1,99,290.
The stock is likely to be listed on BSE and NSE on May 17. During the IPO, up to 15,81,249 shares and 2,21,37,492 shares will be reserved for employees and policyholders, respectively. Over 9.88 crore shares will be reserved for qualified institutional buyers and over 2.96 crore shares for non-institutional buyers.
Employees will get a discount of Rs 45 per share. Retail investors will also get a discount of Rs 45 per share during the IPO. LIC policyholders get Rs 60 per share discount on the final offer price.
The firm has fixed Rs 2 lakh investment limit each for policyholders, employees, and retail investors' quotas. KFin Technologies Limited is the registrar to the IPO. Stake of the government, which currently stands at 100 per cent, will be reduced to 96.50 percent after the IPO.
The company proposes to achieve the benefits of listing the equity shares on the stock exchange through the IPO and carry out an offer for sale of 221,374,920 shares by selling shareholders. Book running lead managers to the issue are Kotak Mahindra Capital Company, Axis Capital, BofA Securities India, Citigroup Global Markets India, Nomura Financial Advisory and Securities India, Goldman Sachs India Securities, ICICI Securities, JM Financial, JP Morgan India and SBI Capital Markets.
Anchor investors are institutional investors who subscribe to an IPO before the issue opens to public. Usually, anchor investors invest in an issue a day before the opening of the IPO. They are required to bid for the shares within the price band for the IPO. Each anchor investor is required to invest a minimum of Rs 10 crore during the issue.
They are not allowed to sell their stake for at least 30 days after the allotment. Subscription to the issue by anchor investors makes other investors confident about the prospects of the share sale.
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