Banks, corporate treasuries dial in for LIC IPO, signal all-round interest

Banks and corporate treasuries have approached the government to participate in the initial public offering (IPO) of Life Insurance Corporation of India (LIC), signaling all-round interest for the country’s largest listing.
 

“Treasuries of banks and companies including Reliance Industries Ltd (RIL), through merchant bankers, have sought an audience of the government to participate in the roadshows for the IPO,” said a government official. An email seeking RIL’s response on meeting with government officials for potential investments in LIC IPO did not get a response.
 

The government-appointed merchant bankers have met some of the public and private sector banks, and corporate treasuries, but not all of them, the official said. The country’s largest public offer has seen strong interest from investors who queued up to be part of the roadshows organised by the Centre’s battery of merchant bankers.
 

Although the wider interest has raised hopes for the insurer’s IPO that’s likely to see some delay due to the ongoing geopolitical tensions, the government is not keen on engaging with treasuries as they look at exiting with early or listing gains, the official said. This creates a downward pressure on the shares as they look to exit quickly, he added. Treasuries have been seeking to meet merchant bankers and the government to seek clarity on LIC’s future growth plans as well as financials, the official said.
 

“They do bring in volumes but tend to exit on day one as soon as the shares list at a premium or the share price increases. That creates a selling side pressure,” the official said. The government’s focus is to bring on board long-term investors and retail investors who look to gain with the insurer’s growth, he added. However, they might still get share allocation if they apply and shares are not over-subscribed, the official quoted above said.
 

According to an industry source, bank treasuries typically invest in IPO where they see more opportunities for gains, which depend on pricing. For LIC too, they will take a call based on pricing, he said. A treasury executive said  whether to invest or not would be decided around the time of the IPO, based on the prevailing sentiment. ‘’To be in government good books, large corporates are likely to invest,’’ he said.
 

An investment banker told Business Standard that corporates can bid in the NII category (non-institutional investor). He said PSU banks plan to apply and investment by any corporate is welcome in such a large issue.
 

A top public sector bank executive said besides preparing ground for managing large retail participation, there has been conversation with the government on banks participating in the offering as institutional investors. Banks would be interested to put in demand for shares in issue based on appetite. There was no demand to carve out specific portions for them, he added.
 

The government had organised mega road shows to engage with about 200 large investors for the LIC IPO. The government-appointed investment bankers were asked to tap large US-based and ESG focused funds for the roadshows. These included US-based Sands Capital, Citadel, and Surveyor Capital, which focus only on mega public offerings globally. Also, there were investors keen on investing based on “excellent” environmental, social, and governance (ESG) track record of LIC such as Marshall Wace and Oaktree Capital, among others.
 

The ongoing war between Russia and Ukraine has shifted the timeline for the launch of the much-awaited IPO. The Centre has time till May 12 to list LIC on stock exchanges without having to make a fresh application with the market regulator Securities and Exchange Board of India (Sebi). A delay beyond May 12 would require the Centre and the insurer to rework its valuation.

The current embedded value of LIC, pegged at Rs 5.4 trillion as on September 30 and for the six-month period ended September, will have to be re-evaluated if the issue is pushed beyond the cut off time of May 12 as approved by the regulator.

But, the government is hopeful of bringing out the LIC IPO before May, and is monitoring the volatility in the market. It is tracking the India VIX index that has seen wild swings lately with index at around 24 against a normal range of 14-15.
 

(With inputs from Samie Modak, Manojit Saha and Abhijit Lele in Mumbai)