Life Insurance Corp. of India’s (LIC) upcoming initial public offering has received ₹13,000 crore worth of investment commitments from anchor investors, more than twice the value of shares offered to such investors, three people with direct knowledge of the development said.
The total commitment from over 100 global and domestic investors is more than the ₹6,300 crore allotment size to anchor investors, they said, requesting anonymity. However, a formal anchor book allotment is yet to begin.
“The government has decided not to divest more than 3.5% stake for at least a year from the listing date,’’ said the first person cited above. “This is being done to ensure that IPO investors get enough headroom to gain through the year,” one of the three people said.
The government’s stake sale in India’s largest insurer is still much lower than the at least 5% stake sale it had originally planned. Geopolitical tensions, soaring oil prices and monetary tightening by major central banks have made global investors skittish about emerging markets stocks, crimping demand for LIC’s shares. Waning investor demand after Russia’s invasion of Ukraine has also squeezed valuations.
“Shares of LIC will now be offered at a price of around ₹949 per share at the lower end of the IPO price band, and anchor investors will be subjected to a lock-in of 30 days. Global pension funds, sovereign funds, private equity funds and domestic mutual funds have already given their investment commitment to LIC. This will ensure a wide shareholding pattern in LIC, which will help the board maintain corporate governance standards and enhance transparency,” the first person said.
Emails sent to spokespeople for the department of investment and public asset management (Dipam) and LIC did not elicit any response until press time. Though the commitments from anchor investors stand at around ₹13,000 crore, the final allotment to anchor investors will be around ₹6,300 crore as the issue size has been slashed by the government to a little more than ₹21,000 crore. Only 60% of the shares offered to qualified institutional buyers (QIBs) can be sold to anchor investors.
LIC’s IPO will be open from 4 May to 9 May for the public, the person said. And, anchor investors who do not get enough shares during the anchor allotment can separately procure more shares of LIC from the qualified institutional buyers’ quota, which will offer shares worth at least ₹10,500 crore.
LIC’s IPO will be the first in the country to offer merely a 3.5% stake to the public, lower than the 5% regulatory minimum stipulated by the Securities and Exchange Board of India (Sebi). “The government wants to keep the supply of LIC shares limited in the market, which is why both stake dilution amount and valuation have been revised from the original estimates,” said the first person.
LIC is valued at ₹6 lakh crore, which is just 1.1 times its original embedded value of ₹5.39 lakh crore, as per the revised estimates of the government.