Exceeds the total commitment of over 100 global and domestic investors He said the allocation size of 6,300 crore to anchor investors, requesting anonymity. However, a formal anchor book allotment is yet to start.
The first person mentioned above said, “The government has decided to sell not more than 3.5% stake for at least one year from the date of listing.” “This is being done to ensure that the IPO investors get enough headroom to make gains during the year,” said one of the three people.
The government’s stake sale in India’s largest insurance company is still much lower than the at least 5% stake sale it had originally planned. Geopolitical tensions, rising oil prices and monetary tightening by major central banks have left global investors worried about emerging market stocks, easing demand for LIC shares.
Declining investor demand after Russia’s invasion of Ukraine has also weighed down valuations.
“LIC shares will now be offered at a price of approx.” 949 per share at the lower end of the IPO price band, and anchor investors will be subject to a 30-day lock-in. Global Pension Funds, Sovereign Funds, Private Equity Funds and Domestic Mutual Funds have already given their investment commitments to LIC. This will ensure a broader shareholding pattern in LIC, which will help the board to maintain corporate governance standards and increase transparency,” the first person said.
LIC’s IPO will be open for subscription from May 4 to May 9, the person said. And, the anchor investors who do not get enough shares during the anchor allotment can separately buy more shares of LIC from the quota of qualified institutional buyers, who will offer shares of lesser value. 10,500 crores.
LIC spokesperson declined to comment. Emails sent to the spokesperson of the Department of Investment and Public Asset Management (DIPAM) did not elicit any response till press time.
Although the commitments of anchor investors are almost equal 13,000 crore, the final allocation to anchor investors will be approx. The government has increased the issue size to a little over Rs 6,300 crore. 21,000 crores. Only 60 per cent of the shares offered to Qualified Institutional Buyers (QIBs) can be sold to anchor investors.
LIC’s IPO will be the first in the country to offer only 3.5% stake to the public, which is less than the 5% regulatory minimum set by the Securities and Exchange Board of India (SEBI). The first person said, “The government wants to limit the supply of LIC shares in the market, which is why both the amount of dilution and the valuation have been revised from the original estimates.”
What is the value of LIC 6 trillion, which is just 1.1 times its original embedded value 5.39 trillion, as per the revised estimates of the government. However, the value embedded in the updated IPO documents filed by the government with Sebi on Monday may also be revised.
On April 13, Mint reported for the first time that the government has reduced the valuation it seeks for LIC to make the initial share sale attractive.
Mint reported last week that the country’s largest insurer reported a stellar performance with first-year premium collections, a key metric, rising 7.9%. 1.98 trillion for the year ended March 31. LIC sold 21.7 million policies in the year ended March 31, an increase of 3.54% over the previous fiscal, increasing its market share in terms of policies sold to 74.6%.
LIC’s better financial position and strong demand from anchor investors may help the government to attract investors in IPOs, even though the actual membership is well dependent on discounts, which are anticipated by various sections of retail investors. In the IPO, 10% of the shares on offer will be reserved for the policyholders of LIC. 5% of the shares will be reserved for the employees. Both employees and policyholders will get a chance to book LIC IPO at a discounted price. The reservation, discount and issue price will be decided by the bankers and the government on Wednesday morning.
However, a senior government official said the discount for policyholders and retail investors could be less than the usual 10% as the government aims to avoid massive profit booking on the day of listing. “If the discount is high, it will create buying pressure on institutional investors in case there is a large number of shares sold by retail investors. The final percentage will be decided soon.”
Since the government will be selling a 3.5% stake in LIC during the IPO, the insurer may be exempted from complying with a SEBI rule that requires publicly traded companies to acquire a minimum public stake of 25% in five years. is required.
The government and SEBI are currently discussing ways to relax norms on minimum public shareholding for LIC, and as per current discussions, more than five years as a special exemption for LIC to achieve the minimum public shareholding target. can be given. The other two people cited above.
“The criteria for achieving the minimum public shareholding target of 25% in five years may be relaxed for LIC and extended up to 10 years. This is being discussed with SEBI. The change will be done through an amendment,” said the government official cited above, requesting anonymity.
LIC’s IPO will be the largest ever public offering in the Indian market, and the government is making every effort to ensure that it runs smoothly in the midst of a volatile market.
Till now, Paytm’s initial share sale in 2021 was the biggest in the country 18,300 crore, followed by Coal India Limited 15,500 crore in 2010 and Reliance Power 11,700 crore in 2008.