Most large global investors may give LIC's initial public offering a miss

But would consider investment after assessing post-listing performance

Most large global investors that the Centre was wooing for Life Insurance Corporation of India’s (LIC’s) initial public offering (IPO) such as those who haven't ever anchored any Indian IPO may give the issue a miss. But in their interactions with the Centre, they have committed to consider investing in the insurer’s future offerings, based on its performance as a listed entity.

During roadshows for the LIC IPO, the Centre had reached out to 180-200 large investors that included sovereign wealth funds, investors who focus on only large IPOs globally, and those who make investment decisions based on environmental, social, and governance (ESG) track record.

Even as the board of LIC has approved a reduction in the size of LIC’s IPO to 3.5 per cent or Rs 21,000 crore, the Centre is still in talks and gauging response from some of these foreign investors to increase the size to 5 per cent, if they choose to participate in the offering.

The Ukraine war dynamics have made foreign investors skittish and they now see currency risks and anticipate embargoes while considering to invest in emerging markets. The US Federal Reserve’s hawkish stance has further made them choose a safe haven, an official said. However, most of these investors have assured the Centre that they would consider investing in the insurer’s future offerings, evaluating LIC’s performance as a listed entity, the official added.

Therefore, the government has decided to go ahead with the IPO even without them, as the response from domestic investors and some foreign investors has been impressive. Even after the flight of foreign capital from the Indian equity markets, the markets have stayed relatively strong on the back of buying by domestic investors. Based on this, the government has cut the issue size of the IPO to around Rs 21,000 crore considering the absorptive capacity of investors for such an offering, the official said.

Now, the IPO — earlier touted to be India’s Saudi Aramco moment — would be a large domestic offering for domestic investors.

As regards marquee foreign investors’ investments in LIC, the government is clear that it will look at an additional stake dilution in LIC only after a year of the insurer’s listing. The Centre’s earlier stance while considering a larger IPO size (5 per cent dilution + Rs 5,000 crore worth shares) was to not come up with any stake dilution or follow-on offering for at least two years.

The board of LIC is set to meet on Tuesday to consider the IPO launch date (likely May 4) , and the discount it will offer to its policyholders.  

The board will consider the proposal of the issue opening date of May 4 and closing date of May 9, an official said.