Image credits : economictimes.indiatimes.com
Recently, two sources informed to Mint that the Centre is eyeing to put a ‘a clutch of anchor investors’ who would invest around Rs.25,000 crore in the initial public offering (IPO) of the Life Insurance Corporation of India (LIC).
According to a government official, the anchor investors are proposed to be invited once the embedded valuation exercise is completed and the IPO pricing is ready. Another sources informed that there might be 24 anchor investors or more for the listing.
An official affirmed that to help to measure market demand investors will obtain a part of LIC’s share that is meant for qualified institutional buyer (QIPs). Furthermore, the sources notified that if the anchor investor pay a certain amount and the market is ready to pay more than that on the IPO day, they will have to put an extra amount to match the market price. The sources added that if the market exhibit a demand of less, they don’t have to refund the excess amount to anchor investors, expressing that this is the advantage of anchor investors.
As far as the reports are concerned, LIC is expected to embrace new accounting norms and change its board structure ahead of the planed IPO. The officials further clarified that the company’s IPO’s draft red herring prospectus will be filed in the coming six months.
LIC is aligning its compliance process with the listing norms and is expected to make changes at the constitutional level. As of now, the company’s board is not in accordance with the prescribed Securities and Exchange Board of India (SEBI) norms. The sources asserted that advisors, merchant bankers and registrar for the IPO will be designated. They confirmed that the valuation exercise is in process and will be aided once the financials are prepared.
In accordance with the SEBI norms, anchor investors are QIPs who purchase company’s share at a prior agreed price by promising to invest around Rs.10 crore in an IPO before it commence. It states that QIP’s can be provided up to 50 per cent of an issue and anchor investors 60 per cent of that. It notifies that each anchor investors is in a 30 days lock in period on the shares.
The report expressed that having an anchor investor would benefit the LIC listing considering the issue size and concern around sustained growth of the restructured entity. However, it added that the exact size of the IPO is not yet ascertained. The officials affirmed, “It will be worked out only after the embedded valuation report of LIC is ready.”