LIC IPO is right-sized, won’t crowd out monetary supply: DIPAM Secy

BL Mumbai Bureau | | Updated on: Apr 27, 2022
Tuhin Kanta Pandey, DIPAM Secretary

Tuhin Kanta Pandey, DIPAM Secretary

According to DIPAM Secretary Tuhin Kanta Pandey, this will be the biggest IPO ever in the country

The initial public offering (IPO) of Life Insurance Corporation of India is right sized given the constraints in the market, DIPAM Secretary Tuhin Kanta Pandey said on Wednesday while underlining that even after the reduced size at about ₹21,000 crore, it would be the biggest IPO ever 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,” Pandey said at a press conference.  

“We want to champion LIC as a long-term value creator in the equity markets,” he further said.

The government will sell 3.5 per cent stake or 22.13 crore equity shares in LIC through an IPO by offer for sale. The issue will open on May 4 and close on May 9.

The issue price is set at a price band of ₹902 to ₹949 per equity share. The government would raise about ₹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 would mean that it would list by May 17.

LIC Chairman MR Kumar said the IPO will usher in a new phase for the insurer or 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. 

The Centre was initially planning to offload 5 per cent stake in the life insurer but reduced it due to market conditions following the Russia-Ukraine war. The IPO was also pushed back from an initial plan of March due to volatility in the global market.

“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,” he said, adding that Indian equity capital markets are benefitting from strong structural tailwinds given concerns in the other markets.

Responding to questions on valuation, Pandey said 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.

He said he expects strong participation from retail investors and added that the government has received feedback that anchor demand is strong.

“While global sentiments are weak, Indian markets are resilient on the back of consistently strong domestic flows,” he noted.

The government will not look at an FPO of LIC for another one year, Pandey said.

SEBI has also granted exemption for dilution of shares. The government will also discuss with SEBI on issues of 25 per cent public float in five years, when the time approaches.

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,” he said.

“We have to meet the Budget also. The Budget is relentless. Everyday there is spending. We want to have capital investments,” Pandey noted while responding to a question on why the listing is being done now when tax collections have been buoyant.

On the issue of IDBI Bank, Pandey said both LIC and the government will exit from management control in the lender.

Published on April 27, 2022
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