With just hours to go before the end of the subscription period for the $ 2.7 billion initial public offering of Life Insurance Corporation of India, foreign institutional funds have ordered only 2% of the share capital set aside for all institutional buyers.
While the IPO’s anchor share declined in the Treasury from Norway and Singapore, the majority of the shares went to domestic mutual funds.
“Foreign institutional investors have fallen sharply in the secondary market since October. “The central bank’s rise in interest rates and the recent depreciation of the rupee against the dollar further increase the risk of a devaluation that could dampen their rise in asset prices in India,” said Vidya Bala, head of research and co-founder of Primeinvestor.in in Chennai.
“So there is little reason for them to take part in a tender, no matter how big it may be.
Named “Aramco Moment” by India, referring to the $ 29.4 billion listing of oil giant Saudi Arabian Oil Co. in the Gulf in 2019 – the largest in the world – LIC’s fleet has ended up resembling the Aramco IPO, not just in scope but in its trust. on domestic investors after foreign buyers considered the fleet too expensive.
LIC has been trying to arouse interest in newspaper advertising since the beginning of the year and has taken advantage of the boom in retail investment in India.
The Indian government had cut IPO funding by about 60% as Ukraine’s war intensified, risk-taking slowed, while rising US interest rates pushed foreign investors out of emerging market equities. It also lowered the valuation it is seeking for the country’s oldest insurance company, which was worth 6 trillion rupees (78 billion dollars) at the top of the price range.
Locals pile in
While foreign investors have circumvented the agreement, retail buyers have been piling up. The policyholders made an offer for the five times the shares that were given to them, but the employee share received orders for almost four times the amount that was available, the stock exchange documents showed. Local investors and policyholders receive a discount on the auction price.
Overall, the IPO has received orders for the 1.79-fold shares available, but about a third of the shares for eligible institutional buyers are unsold.
The muted interest of international investors is in stark contrast to some of last year’s Indian IPOs. One97 Communications Ltd., which operates the digital payment company Paytm, attracted companies such as BlackRock Inc., the Canada Pension Plan Investment Board and the Teacher Retirement System of Texas, among many others, for 183 billion rupees of its stock sales last year. Food delivery platform Zomato Ltd. was similarly popular with foreign investors.
However, these buyers have been forced to lose nursing as interest in India’s technological boom waned after some flop. Paytm fell by 27% in its debut and is now 74% below the offer price. Zomato had a strong debut last summer but has since lost 20% in price.
Investors have also been concerned about LIC’s ability to maintain market share as private insurers such as HDFC Life Insurance Co. Ltd. and SBI Life Insurance Co. Ltd. expand. The private sector has been aggressively expanding during the pandemic and new premiums have grown while LIC is struggling.
“Foreign institutional investors have generally never been much for state-owned companies as it is very difficult to make money from them,” said Abhay Agarwal, CEO of Piper Serica Advisors Ltd. international investors that the insurer will prioritize the interests of shareholders and will not operate solely as a government entity.
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