LIC IPO anchor book — domestic mutual funds step up as most marquee foreign investors skip India’s biggest IPO yet

• India’s biggest yet, the ₹21,000 crore LIC IPO is now open for subscription.
• Prior to opening it to the public, the LIC anchor book raised ₹5,627 crore from several mutual funds and foreign institutional investors, with over 123 anchor investors taking part.
• However, domestic mutual funds bought a majority of the shares set aside for anchor investors ahead of the LIC IPO while not many FIIs participated.

State-owned insurance behemoth Life Insurance Corporation of India (LIC) mopped up ₹5,627 crore at the upper price band of ₹949 per share.

LIC’s anchor book witnessed strong demand from 123 anchor investors including the majority of domestic mutual funds (over 90 mutual fund schemes) and few global marquee investors. Domestic mutual funds bought 71% of the anchor shares set aside for anchor investors.

Domestic mutual funds bought a majority of the shares set aside for anchor investors ahead of the LIC IPO while not many FIIs participated. Most marquee foreign investors skipped the LIC IPO despite the government reportedly reaching out to the sovereign wealth and pension funds to be anchor investors.

According to a report by the Economic Times, India had approached the Abu Dhabi Investment Authority, Singapore-based GIC, three Canadian pension funds and the Qatar Investment Authority among other sovereign wealth funds and pension funds to be anchor investors in the IPO.

Anchor investors are marquee institutional investors who are allotted shares in an IPO before the issue opens. As the name suggests, they ‘anchor’ the IPO issue by agreeing to subscribe to shares at a fixed price and thereby indicate a healthy demand for the soon-to-be listed shares.

Top 10 LIC IPO anchor investors

Here are the top 10 investors that bought the majority of anchor book offerings.
To give some perspective, analysts are concerned about LIC's growth prospects as it is losing market share to private players like HDFC Life, ICICI Prudential Life etc.

Also, analysts feel if LIC is unable to retain agents, who bring huge business to the firm, the insurer could face challenges going forward.

“LIC has lower new policy growth rate as they continue losing market share to private insurance players, especially in urban areas. Individual agents procure most of LIC’s individual new business premiums (close to 97%). If LIC is unable to retain and recruit individual agents on a timely basis and at reasonable cost, there could be a material adverse effect on their results of operations,” said analysts at Investmentz, an online investment platform.

LIC has the largest individual agent network of 8.96 lakh, which dropped from 10.86 lakh as of March 31, 2021. Individual agents bring 96% of new business premiums to the life insurer.

After anchor investment ahead of the IPO, the issue size has slashed to ₹15,372 crore. The IPO opened today and will close on May 9.

Meanwhile, the premium on the LIC IPO in the grey market has fallen to ₹65 per share from ₹85 earlier.


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