Clipped from: https://www.thehindubusinessline.com/todays-paper/ipo-lic-brass-on-overdrive-to-attract-marquee-investors/article65063870.ece
LIC’s mega IPO can raise as much as 25 per cent of the total capital raised in India last year | Photo Credit: DANISH SIDDIQUI
Aims to reach out to 200 institutions, sovereign wealth funds in 2 weeks
LIC’s top management is leaving no stone unturned to attract marquee global institutions for the insurance behemoth’s upcoming IPO, billed as India’s largest. They have been working across time zones through virtual meetings to interact with top honchos of global institutions who make crucial investment decisions.
The aim is to reach out to at least 200 top global and domestic institutions over the next couple of weeks as part of the roadshows for the IPO, sources said. “The process of wooing global investors has already started and virtual meetings with marquee investors and sovereign wealth funds such as Singapore’s GIC and US-based Fidelity are already done.
Across time zones
To adjust to the different time zones, the LIC management is on virtual meetings routine from early morning till late in the night,” they added. On the domestic institutions front, the management has already interacted with ICICI Prudential Mutual Fund and HDFC Mutual Fund brasses, said sources.
The government plans to offload 5 per cent (31.62 crore shares) through OFS that could help it mop up Rs. 65,000-80,000 crore, depending on the final pricing that the Union Cabinet decides on, in consultation with the book running lead managers, who are expected gauge the appetite of global institutional investor the offering.
Liquidity gush coming
If early indications are anything to go by, there is already tremendous interest among global investors, especially through the anchor book allocation (about 8.06 crore shares). Even the currency markets are preparing for a liquidity gush from overseas during the offering; the rupee forwards are already signalling a surge in inflows that could lead to appreciation of the Indian unit.
By one estimate, LIC’s IPO, which is likely to run from March 10-14, can raise as much as 25 per cent of the total capital raised in India last year. At an assumed issue size of about Rs. 65,000 crore, the listing valuation would come in at $172 billion.
In 2021, India saw a record total capital-raise of $34 billion, of which IPOs accounted for $16 billion. While retail investors accounted for 32 per cent of the total IPO subscription, DIIs clocked in at 21 per cent. Analysts say the successful completion of this IPO could have some impact on the market, in general, and the IPO pipeline, in a particular.
More to come
To conform to SEBI guidelines, the government will have to mandatorily dilute its stake in LIC to allow public shareholding of 10 per cent within two years, and 25 per cent in five years, ensuring constant supply. Assuming that the current IPO size will be Rs. 65,000 crore, there will be further dilution in the coming years totalling $8.6 billion in two years, and $34 billion in five years. If there were to be sufficient demand for this supply, analysts reckon that a chunk of the government’s cash flow can be sustained by repeated dilutions in LIC.
Retail push
LIC is also looking to tap into its large customer base to generate buying interest. Policyholders are likely to be lured with a rumoured 10 per cent discount, in addition to the 10 per cent (3.16 crore shares) of the issue size that is already reserved. The importance of LIC for Indian households can be gauged from the fact that nearly Rs. 10 out of every Rs. 100 saved by one each year goes to LIC, making it larger than the perceived staple of household savings — deposits with the State Bank of India, a recent research report by UBS showed.
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