LIC’s senior management is leaving no stone unturned to attract the global institutional biggies for the insurance behemoth’s upcoming initial public offering (IPO), which is billed as India’s largest such offering ever. The LIC’s senior management is working round-the-clock through virtual meetings to interact with top echelons of global institutions, who make crucial investment decisions.
The aim is to reach out to atleast 200 top global and domestic institutions around the world over the next two weeks as part of the roadshows for the IPO, sources privy to the developments said.
“The process to woo 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. To adjust to the different time zones, LIC management is up on their virtual meetings routine from early morning till late in the night ”, they added.
On the domestic institutions front, LIC management has already interacted with the top honchos of ICICI Prudential Mutual Fund and HDFC Mutual Fund, sources said.
A Behemoth comes to the market
The Government plans to offload a 5 per cent stake (31.62 crore shares) — out of its 100 per cent shareholding — through an offer-for-sale that could help it mop up anywhere between ₹65,000 crore and ₹ 80,000 crore depending on the final pricing that the Union Cabinet will decide in consultation with the Book running lead managers, who are expected to convey the kind of global institutional investor appetite for the offering.
State-owned LIC filed its draft red herring prospectus with SEBI on February 13.
If early indications are anything to go by, there is already tremendous interest among global biggies for picking up a slice especially through the anchor book allocation (about 8.06 crore shares). Even the currency markets are preparing for a big gush of liquidity inflows from overseas markets during the offering — look at how the rupee forwards are signalling a expected surge in inflows that could lead to appreciation of local currency!
By an estmate, LIC’s mega IPO offering, which is likely to run from March 10-14, is looking to raise for the government as much as 25 per cent of the total capital raising done in India last year. At an assumed issue size of about ₹65,000 crore ($8.6 billion), the listing valuation would come in at $172 billion.
In 2021, India saw record total capital raising of $34 billion, of which IPOs accounted for $16 billion. While retail investors accounted for 32 per cent of total IPO subscription, domestic institutional investors accounted for 21 per cent.
Analysts say that the successful completion of LIC IPO could have some impact on the market in general, and the future IPO pipeline. 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 2 years and 25 per cent within 5 years, ensuring constant supply.
Assuming that current IPO size will be ₹65,000crore ($8.6 billion), 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 decent chunk of the government’s cash flows could be sustained by repeated dilutions in LIC.
LIC and households
LIC, which has the largest agent network in the country if 1.35 million registered agents, is also looking to tap into its large customer base to generate buying interest in the IPO. Policyholders are likely to be lured with a rumoured 10 per cent discount. Already 10 per cent ( 3.16 crore shares) of the issue size are being reserved for the policyholders. Importance of LIC for Indian households can be gauged from the fact that nearly ₹10 out of every ₹100 saved by an Indian household each year goes to LIC, making it larger than the perceived staple of household savings— a deposit with State Bank of India, a recent research report by UBS showed.