Government approaches foreign sovereign, pension funds to be anchor investors to LIC public issue


The Centre has approached the sovereign wealth and pension funds to be anchor investors for the upcoming public issue of the state-run insurance giant Life Insurance Corporation of India (LIC), sources told The Economic Times.

These sovereign wealth and pension funds include the Qatar Investment Authority, Singapore-based GIC, three Canadian pension funds, the Abu Dhabi Investment Authority among others, it added.

The government wants to confirm their participation from these institutions because they are stable investors with a long-term horizon and have previously indicated interest in the public issue, an official said.

“Many leading sovereign funds expressed interest in the LIC IPO. Merchant bankers are in advanced discussions with them for being anchor investors in the issue,” the official said.

During roadshows ahead of the IPO, touted to be rolled out in May, the Centre has tapped around 180 potential anchor investors. Officials told the paper at least eight to 10 “big-ticket foreign investors” will be required as anchor investors for India’s largest-ever IPO.

“There is still no firm commitment on the quantum of the investment they were likely to make. That will happen when we zero in on the final issue price and when it is communicated to them. The process is on and we will do it soon,” the official said.

“One key consideration is the listing price and the market capitalisation at that level. Anything below Rs 10.7 lakh crore valuation at listing can make inclusion in the MSCI index difficult,” they said.

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What we know

Sources told Mint that the government plans to cut the Life Insurance Corporation (LIC) public offer valuation by 30 percent to make the issue more attractive despite concerns about soaring inflation, imminent interest rate hikes, and uncertainty surrounding the Russian invasion of Ukraine that has rattled markets across the world.

The government now looks at a valuation of around Rs 11 lakh crore from the IPO, slashed from Rs 16 lakh crore planned earlier, the sources added.

The LIC board will meet this weekend to “finalise its FY22 results and subsequently file a revised public offer document by the middle of next week”, sources told The Economic Times. A government source also said the listing “would be completed by May 12”.

The company will file the revised documents with the Insurance Regulatory and Development Authority of India (IRDAI) after its results are approved by the board. There are also whiffs of an April-end opening for the issue after roadshows are completed.

The government may also file an updated draft red herring prospectus (UDRHP) for the IPO with the market regulator Securities and Exchange Board of India (SEBI), sources told CNBC-TV18.

Also Read | With LIC IPO back on track, it’s crucial to strike the right stock price

As per the current DRHP, the government will dilute 5 percent stake in the insurance behemoth through 31.6 crore shares to garner Rs 63,000 crore. It would help meet the Centre’s curtailed disinvestment target of Rs 78,000 crore for the current fiscal.

A portion of the IPO would be reserved for anchor investors. Also, up to 10 percent of the issue size would be reserved for policyholders.

The LIC public issue would be the biggest IPO in the history of the Indian stock market. Once listed, LIC’s market valuation would be comparable to top companies like Reliance Industries Limited and Tata Consultancy Services.

Sebi guidelines for listing  

The government has time till May 12 to launch the LIC IPO without filing fresh papers with the markets regulator and if it misses the window, then LIC would have to file fresh papers, giving the results of the December quarter and also update the embedded value.

LIC’s embedded value, which is a measure of the consolidated shareholders value in an insurance company, was pegged at about Rs 5.4 lakh crore as of September 30, 2021, by international actuarial firm Milliman Advisors. Although the DRHP does not disclose the market valuation of LIC, as per industry standards it would be three times the embedded value.

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