How your life insurance premium bails out PSU IPOs

Life Insurance Corporation (LIC) once again prevented a public sector company's IPO from crashing into failure when it invested between Rs 2,900-3,000 crore in the Rs 4,230 crore issue of Hindustan Aeronautics Limited (HAL) to ensure that the IPO was fully subscribed.
Prior to the LIC investing the money it collects as premium for the life insurance policies it sells, the HAL issue was subscribed less than 50 per cent. This, however, isn't the first time, nor does it look like it will be the last, when LIC has been arm-twisted to save the government's face on the divestment market.

In 2012, the then government was left red-faced after its bluest blue-chip ONGC's offer for sale (OFS) went abegging till the LIC stepped in, quite literally, at the last minute, purchasing 88.3 per cent of the shares on offer, which helped it get 4.4 per cent of the 5 per cent stake offered by the government.

Coal India, which had a spectacular IPO in 2010, with its issue being subscribed by more than 15 times, had to depend on LIC for a face-saver for its OFS in 2015 - when the life insurance behemoth picked up 4.51 per cent of the 10 per cent shares on offer for Coal India's Rs 22,600 crore follow-on issue. That helped the issue get subscribed by 1.06 times.

Last year, in another act of saving the government's honour, LIC invested close to Rs 6,000 crore in the Rs 11,372 crore IPO of India's only reinsurer, General Insurance Corporation (GIC Re) to help the insititutional part of the IPO get subscribed by 2.2 times.

A month after the GIC Re IPO, probably with the intention of not being the saviour of last resort, LIC invested Rs 6,500 crore on the opening day of the New India Assurance company's Rs 9,600 crore IPO, helping the institutional part get subscribed by 2.13 times.
With more PSUs expected to list on the bourses, LIC's stock portfolio is expected to see more action.