The government is considering enlisting a group of anchor investors to invest up to Rs 25,000 crore in the Life Insurance Corporation of India (LIC)’s IPO (Initial Public Offering). The LIC will also undergo board restructuring and adoption of new accounting standards before IPO. As per the sources of The Mint the anchor investors will be invited for IPO after the embedded valuation is done.
A 10% share in the country’s largest insurance company is estimated to be worth at least Rs 1 lakh crore, a staggering amount in the Indian equities market. As per the sources of The Mint, “The anchor investors will purchase a portion of LIC’s shares, meant for qualified institutional buyers (QIBs). If anchor investors pay a certain amount and the market is ready to pay more than that on the day of IPO, the anchor investors will have to bring in the extra amount to match the market price. If the market shows a demand of less, we don’t have to refund the extra amount to anchor investors. This is the benefit of having anchor investors.”
In the meanwhile, the state-run insurer is bringing into line its compliance processes with listing standards and will make “constitutional” reforms. The LIC board is currently not operating in accordance with SEBI regulations.
According to the source, “the insurer’s red herring prospectus will be submitted within six months. The appraisal procedure will be aided once their yearly financials are out. The RFP for recruiting merchant bankers, consultants, and the registrar for the IPO will be released very soon.”
According to SEBI norms, “Institutional investors that are offered shares in an IPO a day before it opens are known as anchor investors. They are expected to ‘anchor’ the issue by committing to subscribe to shares at a preset price so that other investors know there is demand for the shares issued, as the term implies. Each anchor investor must contribute at least Rs. 10 crore to the issuance.
As reported by Live Mint, Some of those who have already filed the draft red herring prospectus (DRHPs) with the Sebi include Aadhar Housing Finance ( ₹7,500 crores), Policy Bazaar ( ₹4,000 crores), Aptus Housing Finance ( ₹3,000 crores), Star Health Insurance ( ₹2,000 crores), Aditya Birla Sun Life AMC ( ₹1,500-2,000 crore) Arohan Financial Services ( ₹1,800 crores), Fusion Microfinance ( ₹1,700 crores), Fincare Small Finance Bank ( ₹1,330 crores), Tamilnad Mercantile Bank ( ₹1,000-1,300 crore), Medi Assist ( ₹840 crores) and Jana Small Finance Bank ( ₹700 crores), among others.
In 2009, SEBI introduced the notion of anchor investors in initial public offerings (IPOs). Qualified institutional buyers have a 50% reserve in book-built IPOs. Anchor investors might be allocated up to 30% of the overall offering size.”
