LIC IPO: Leading Sovereign Wealth, Pension Funds Show Interest; Know Details

Leading sovereign funds, including Abu Dhabi Investment Authority, Singapore-based GIC, three Canadian pension funds and Qatar Investment Authority, have shown interest to be anchor investors in Life Insurance Corporation’s (LIC) upcoming IPO, according to an ET report. The initial public offering (IPO) is expected to be launched by the end of this month. It will allocate 60 per cent of the qualified institutional buyers’ (QIBs) portion to anchor investors on a discretionary basis.

“Many leading sovereign funds have expressed interest in the LIC IPO. Merchant bankers are in advanced discussions with them for being anchor investors in the issue,” the report said quoting sources. The Centre has already shortlisted 50-60 anchor investors, including BlackRock, Sands Capital, Fidelity Investments, Standard Life, and JP Morgan. Here’s what you need to know about the upcoming IPO and developments around it:

Govt Making It More Attractive

The government is planning to reduce the state-owned insurance behemoth’s valuation by 30 per cent to make it more attractive. It looks at a valuation of around Rs 11 lakh crore from the IPO, against Rs 16 lakh crore earlier. The firm’s embedded value stood at Rs 5.39 lakh crore as of September 31, 2022, according to draft papers of the IPO. The valuation of the IPO is likely to be three-five times the embedded value.

The IPO Issue Date

The government plans to launch the offer by the end of this month. The government filed fresh draft papers for the IPO last month and now, it has time till May 12 to launch the offer. In case the Centre fails to launch the IPO by then, it will need to file fresh papers with the Securities and Exchange Board of India, give the results of the December quarter and also update the embedded value.

The IPO was earlier planned to be launched by March in the last financial year 2021-22 but the high volatility in the markets due to the Russia-Ukraine war derailed the plan.

Size Of The IPO

The government aims to raise around Rs 60,000 crore by selling its 5 per cent stake, or 31.6 crore shares, in the state-owned company. However, the Centre is also mulling over raising the size of the LIC IPO. After discussing with investment bankers, the government may file an updated draft red herring prospectus (DRHP) with markets regulator Sebi soon.

Quotas Reserved For Various Investors

Around half of the IPO issue has been fixed for qualified institutional buyers (QIBs), and 60 per cent of the QIB’s portion is earmarked for anchor investors on a discretionary basis. One-third of the anchor investor portion will be reserved for domestic mutual funds.

About 15 per cent will be reserved for non-institutional investors (NII). Retail investors can participate in 35 per cent of the offer. A significant portion will also be reserved for the policyholders and it should not exceed 10 per cent of the public issue. For employees also, 5 per cent of LIC IPO will be reserved. Both the employees and policyholders will get a chance to book LIC IPO at a discounted rate.

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