Friday, May 13, 2022

LIC IPO right sized, keeping in view constraints of market: DIPAM Secretary

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  • The issue price has been set at a price band of Rs 902-949 per equity share
  • The DIPAM Secretary said that the government has received feedback that anchor demand is strong and is expecting strong participation from retail investors

New Delhi: The Initial Public Offering (IPO) of state-run Life Insurance Corporation (LIC) is right sized, keeping in view the constraints of the market, Department of Investment and Public Asset Management (DIPAM) Secretary Tuhin Kanta Pandey said on Wednesday while addressing the media. Pandey said that even at the reduced size of 3.5 percent, the IPO would be the largest IPO in the country. “This is right sized considering the capital market environment and will not crowd out capital and monetary supply even in the current environment constraints,” said Pandey at a press conference.  

“We want to champion LIC as a long-term value creator in the equity markets,” he further said. The government has decided to pare 3.5 percent stake or 22.13 crore equity shares in LIC through an IPO by offer for sale. The IPO will open on May 4 and close on May 9.

The issue price has been set at a price band of Rs 902-949 per equity share. The government would raise around Rs 21,000 crore through the issue at the higher end of the price band. The minimum bid lot is 15 equity shares and in multiples of 15 shares after that.

The allotment of shares to the demat account would be done within six days working days of the bid or offer closing date. This essentially means that LIC would list by May 17.

IPO: New phase for LIC 3.0, says Chairman

Addressing the media, LIC Chairman MR Kumar said that the IPO will usher in a new phase for “LIC 3.0.” “LIC struggled in the first two decades to sell insurance in India. Then it gathered momentum in the 70s and 80s. That was LIC 1.0. Then it adapted to the competition, which was LIC 2.0. And now this is LIC 3.0,” said Kumar. He added, “The time has come for LIC to be listed; I believe all LICians will work together to make it a huge success, and from now on we will call it LIC 3.0.”

“We will take all measures required to take for shareholder value creation going forward. There are many things we are doing,” he further said. 

‘Decision to list now taken after considering multiple factors’

“The decision to list now has taken into account the combination of multiple factors including market demand, which includes solid anchor book, stabilising market conditions, reducing volatility, domestic flows and corporation’s financial performance,” said Pandey. The Centre was initially planning to offload 5 percent stake through the IPO and launch the issue in March itself. However, volatile market conditions due to Russia’s invasion of Ukraine caused the government to delay the announcement.

The DIPAM Secretary said that the government has received feedback that anchor demand is strong and is expecting strong participation from retail investors. “While global sentiments are weak, Indian markets are resilient on the back of consistently strong domestic flows,” he said.

The government will not look at an FPO of LIC for another one year, Pandey said. An exemption has also been granted by SEBI for dilution of shares. The government will discuss with SEBI issues of 25 percent public float in five years, when the time approaches, said Pandey. Noting the huge scale of LIC, Pandey said, “That constraint will come and it may not be feasible. This rule has come for the first time for large operations. At the appropriate time, we will discuss and solve it.”

“We have to meet the Budget also. The Budget is relentless. Everyday there is spending. We want to have capital investments,” Pandey said.

LIC valuation

On being asked about valuation, the DIPAM Secretary said that valuation is a discovery process and has been arrived at by the merchant bankers. “It is a fair and attractive valuation. It’s important to make it attractive because goal is also to enable millions of Indians participate in this IPO process and increase their value as LIC unlocks itself,” he stressed.

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