LIC IPO | 3 Reasons Why Foreign Investors Are Showing Muted Interest In IPO

LIC IPO: The issue has seen a muted interest from foreign investors including FIIs. Most of the bidding for the shares has been done by domestic investors. We look at 3 reasons for the same.

LIC IPO | New Delhi: The LIC IPO has been subscribed 2 times on Monday, the last day of subscription. But the IPO has seen a muted response from the foreign investors. According to a report by Bloomberg, the foreign institutional funds have put orders for 2 per cent of the shares set aside for the institutional buyers. Most of the investment has been done by domestic investors.

Why Are Foreign Investors Showing Less Interest In LIC IPO?

According to the report, there are several reasons for this.

1. Fed Rate Hike: The Federal Reserve has hiked the bank rate by 50 basis points. This has led to an erosion of interest of foreign investors in the IPO. Since October, the FIIs have been pulling out of the Indian market. The FPI ownership in Indian shares is the lowest since March 2019.
2. Rupee Slides Against Dollar: The value of the rupee has also been eroding against the dollar. On Monday, the rupee slid to an all-time low against the USD at Rs 77.18. This has made investment costly for foreign investors. The IPO is being deemed as ‘too expensive’.
3. Shaky Global Markets: The ongoing Russia Ukraine war has shaken the global markets. The LIC IPO had to be postponed by the government due to the war, this has dented the risk appetite. The issue size was also reduced by up to 60 per cent by the government owing to the war. This has impacted the overall valuation of the largest insurer in India.

LIC IPO GMP

According to the latest estimates, the GMP of the issue was Rs 36 per equity share on Monday. The GMP has been falling constantly owing to the overall slowdown in investment in the primary and secondary markets in India. The Indian share markets have also been trading in the red since the Reserve Bank of India (RBI) announced a repo rate hike by 40 basis points last week.

The LIC IPO will list on the bourses on May 17 and the allotment of the shares will be announced on May 12. As of 11 AM on Monday, the issue was subscribed 2 times. The policyholders’ quota has been oversubscribed the most, over 5 times.