Life insurance companies are likely to invest Rs 4,000 crore in the Coal India Ltd initial public offering (IPO) — India’s largest ever — which opens on Monday.
“There is huge interest in this issue from a long-term investment perspective,” said Vikram Kotak, chief investment officer at Birla Sun Life Insurance Company. “The IPO is one way of getting Coal India shares. If we don’t get enough, we will buy shares from the secondary market,” he added.
Kotak said the issue could be subscribed 15 times, given the interest shown by foreign institutional investors (FIIs). Coal India is the country’s largest producer of coal.
Chief investment officers of insurance companies expect the industry to invest around Rs 4,000 crore in the issue. “There should be an enthusiastic response from insurance companies,” confirmed Sashi Krihnan, CIO, Bajaj Allianz Life Insurance.
Of that estimated amount, state-owned Life Insurance Corporation of India (LIC) alone will probably pick up shares worth around Rs 3,000 crore, industry sources estimate.
“The issue is reasonably priced and LIC would be a big applicant,” said Prasun Gajri, chief investment officer at HDFC Standard Life. “Though insurance companies have been buyers on stock markets, domestic institutional investors (DIIs) were net sellers,” added Gajri.
A senior LIC executive said since the issue closes on October 20 for qualified institutional buyers, his firm would probably decide the amount of shares it would buy on Monday. Its appetite for Coal India shares has been whet by the fair pricing and the fact that not many such issues are available on the market, he explained.
“Now, we can invest from both our Ulip (unit-linked insurance plan) and life funds. The Ulip fund will also have a medium- to long-term perspective,” the executive added. The lock-in period for Ulips has been raised by the regulator from three years to five.
| BLACK GOLD # Analysts say the issue may be subscribed 15 times, given the high interest shown by FIIs # Birla Sun Life to buy Coal India shares in secondary market if it doesn’t get enough from IPO # Life Insurance Corporation will probably pick up Coal India shares worth around Rs 3,000 cr # LIC’s appetite has been whet by fair pricing and the fact that few such issues are available |
LIC plans to invest Rs 60,000 crore in equities, of a total investment of Rs 2 lakh crore, during the current financial year. In the first six months, LIC has invested around Rs 20,000 crore in equities.
The Coal India IPO is expected to garner around Rs 15,400 crore. The company is offering 630 million shares with a face value of Rs 10 each. The issue closes on 21 October.
The government is selling 10 per cent of its current 100 per cent stake in the company.
The price band for the IPO is fixed at Rs 225-245. Retail investors and Coal India employees have been offered a discount of 5 per cent. Qualified institutional buyers can subscribe to 50 per cent of the shares, retail investors 35 per cent and high net-worth individuals the remaining 15 per cent.
Both DIIs and FIIs have been net sellers on the markets over the past few days. Some brokers say this is to generate cash to invest in the IPO. On Friday, FIIs were net sold shares worth Rs 113 crore, while DIIs net sold Rs 1,053 crore.
