India has released the investment authority of Abu Dhabi, Singapore-based GIC, three Canadian pension funds and Qatar investment authorities among state wealth funds and pension funds to become an anchor investor in Life Insurance Corporation (LIC) from the initial public offering of India (IPO).
The funds have shown interest and the government wants to confirm their participation, officials who are involved in the offer. ET has reported earlier this week that IPOs are likely to be held towards the end of this month.
“Many leading sovereignty funds have expressed interest in LIC IPO. Merchant bankers are discussing with them to become an investor anchor in this matter,” one of the officials to ET. The government is interested in their participation because these funds are stable investors with long-term horizons, the person said. The government has reached around 180 potential anchor investors during roadshows. Officials feel at least 8-10 major ticket foreign investors will be needed as an anchor investor for the IPO, which will be the largest Indian public offering ever.
In December last year, the effects and Exchange Board of India (SEBI) have extended the locking period for anchor investors up to 90 days from 30 days earlier. Market regulators also remove restrictions on the maximum number of anchor investors for public problems of more than 250 crores. At the estimated value of the embedded RS 5.4 lakh crore, the center can increase Rs 60,000-70,000 Crore through 5% of stock sales in LIC. The anchor investment portion is estimated at around RS 18,000 Crore.
According to the draft Red Herring Prospectus (DRHP) submitted with SBI, insurance companies will allocate 60% of the quality portion of institutional buyers (QIBS) for investor anchors based on discretionary. Strong anchor investments provide confidence in other retail and institutional investors, helping to produce IPO requests when opened to the general public.
The official said that while the discussion occurred, there was still no strong commitment to the quantum of investment they might make. “It will happen when we zero at the final problem price and when communicated to them.
The process is active and we will do it immediately, “the official said, without giving the timeline. One major consideration is the price of the list and market capitalization at that level. Anything below ‘10.7 Lakh Crore Assessment on listings can make inclusion in MSCI Index difficult , said the official. The government has budgeted Hospital 65,000 Crore from disinvestment in the current financial year.
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