Govt shortlists up to 60 anchor investors for LIC's share sale

Price discovery estimates insurer's value at around Rs 7 trillion

For the initial public offering (IPO) of the Life Insurance Corporation of India (LIC), the Centre has shortlisted 50-60 anchor investors, which include BlackRock, Sands Capital, Fidelity Investments, Standard Life, and JP Morgan, and will soon finalise its anchor book.

The feedback from anchor investors has led to price discovery in LIC shares, valuing India’s largest insurer at around Rs 7 trillion, said an official aware of the development. The “attractive valuation” is seen widening the investor base by providing an opportunity to more of them to participate in the IPO, the official added.

The Centre and its intermediaries shared a range for valuation with investors, and the lower-than-expected valuation is a result of the present market conditions, which have come about owing to geopolitical tensions, making investors sceptical, an official said.

The decision on valuation would soon be finalised, another official said.

The government took feedback from investors, and is considering their views to make India’s largest public offering more attractive for institutional and other investors, he added.

Investment-commitment letters, which quote the valuation, have been taken from investors shortlisted by a high-level committee, comprising top government officials, in consultation with merchant bankers, said an official. Even as these investors have been shortlisted, 25 per cent of them could drop out, an official said.

Emailed queries sent BlackRock, Sands Capital, Fidelity Investments, Standard Life, and JP Morgan did not elicit a response. The anchor investors would soon be finalised, an official said. This would be done considering the fulfilment of the qualified institutional buyers’ quota, he added.
 

Based on the Department of Investment and Public Asset Management’s (DIPAM’s) assessment, the government will require a 10-day window to complete further filings with the regulator, and announce the issue.

To broaden the investor base and comply with the guidelines of the Securities and Exchange Board of India (Sebi), the Centre will increase the number of shares it will sell through the IPO from 316 million announced earlier.

The government has the window to sell up to a 7.5 per cent stake, but is unlikely to utilise it, and may dilute a little over 5 per cent. The change will be notified in the red herring prospectus (RHP), which will soon be filed by the insurer.

The Centre is looking to launch the IPO in April because a delay beyond May 12 would require the government and LIC to make fresh filings with Sebi.

Run-up to mega IPO

• Investment commitment letters taken from investors in a meeting with a panel of top govt officials
• Anchor investors to be finalised based on fulfilment of QIB quota
• Centre has shared a valuation range with investors
• Lower-than-expected valuation is a result of present market condition
• Lower valuation to make the offering 'attractive' for investors; widen investor base