Even before its initial public offering (IPO) opened, the Life Insurance Corporation (LIC) of India has managed to raise over Rs 5,600 crores from anchor investors. A big chunk of this investment has come from domestic mutual funds, which have pumped in over Rs 4,000 crores into the books of the country's largest insurer. Of the total 59.3 million shares on offer for anchor investors, domestic mutual funds bought 42.1 million shares, which accounted for 71.12 percent of the total anchor book portion, for Rs 949 apiece, the upper band of the price range.
SBI Equity Hybrid mutual fund scheme got the largest share of the anchor book at 9.2 percent shares. It invested Rs 519 crores. ICICI Value Discovery bought 3.9 percent of anchor book shares for Rs 220 crores and SBI Balanced Advantage Fund got 3.6 percent for Rs 205 crores.
Domestic mutual funds have several reasons to show such high interest in investing in the country's biggest and most recognised insurance company. Fund managers say the valuation of the IPO and its resizing are two major factors for the public offer's attractiveness among institutional buyers. Another factor, they add, is LIC's focus on digitisation of its services.
LIC is expected to be valued at Rs 6 lakh crore after the IPO, which will make it a large-cap firm. The government initially planned to sell its 5 percent stake, but later downsized it to 3.5 percent.
Experts say markets should be able to handle this kind of supply even in this dynamic global environment. The third and crucial factor (digitisation) has contributed to the IPO's demand as investors see a willingness on part of LIC to go digital.
The state-owned company recently tied up with Policybazaar, showing that it is no longer dependent only on its network of field agents.
The IPO opened today for all public, who can bid for it until May 9. The government aims to raise Rs 21,000 crore from the IPO.