LIC IPO: The state-owned insurance major Life Insurance Corporation of India (LIC) on Sunday filed its draft red herring prospectus (DRHP) for its mega IPO with the markets regulator SEBI (Securities and Exchange Board of India). As per the filing, the government of India, which holds 100 per cent share in the country’s biggest life insurer, is expected to offer 316 million equity shares for sale from the total of 6.32 billion shares. LIC IPO will be purely an OFS (offer for sale) transaction.
The government will sell 5 per cent of its stake, fetching between Rs 60,000 crore and Rs 75,000 crore, thus pegging the insurer’s market value between Rs 12 trillion and Rs 15 trillion. The final valuation will be decided closer to the IPO.
LIC IPO: Portion Reserved for Retail Investors
LIC has reserved up to 35 per cent of its total IPO size for retail investors as per the draft papers. In the short term, experts say that India could see the opening of demat accounts in record numbers around the LIC IPO and that could lead to higher revenue to the government through securities transaction tax (STT).
Also Read: LIC IPO: India’s Biggest-Ever IPO is Finally Here, Govt to Offload 5% Stake; Know Details
LIC IPO: Portions Reserved for Staff, Policyholders
The draft prospectus specifies the portion reserved for staff shall not exceed 5 per cent of post-offer equity share capital and may be offered at a discount. Further, it said the policyholder reservation portion will not exceed 10 per cent of the size and may also be offered at a discount.
LIC IPO: Portion Reserved for Anchor Investors, QIB, NII
For the Qualified Institutional Buyers (QIB), the company will reserve 50 per cent of LIC IPO. The Non-Institutional Investors (NII) quota was fixed at 15 per cent.
About 60 per cent of qualified institutional bidders portion may be allocated to anchor investors on a discretionary basis. As per the filing, if there is under-subscription for the anchor investor portion, the remaining equity shares shall be added to the net QIB portion.
“Subject to valid bids being received at or above the offer price, under-subscription, if any, in the non-institutional portion or the retail portion, would be allowed to be met with spillover from any other category or combination of categories of bidders at the discretion of our corporation and the selling shareholder in consultation with the book running lead managers and the designated stock exchange,” the prospectus stated.
Conditions for Anchor Investors
The DRHP also sets the conditions for anchor investors, on the basis of which the shares will be allocated to them subject to there being
1) a maximum of two anchor investors, where allocation in the anchor investor portion is up to Rs 10 crore;
2) minimum of two and maximum of 15 anchor investors, where the allocation under the anchor investor portion is more than Rs 10 crore but up to Rs 250 crore subject to a minimum allotment of Rs 5 crore per anchor investor and;
3) in case of allocation above Rs 250 crore under the anchor investor portion, a minimum of five and a maximum of 15 anchor investors for allocation up to Rs 250 crore, and an additional 10 anchor investors for every additional Rs 250 crore or part thereof will be permitted, subject to minimum allotment of Rs 5 crore per anchor investor.
Bidding for anchor investors will open one working day before the bid/ offer opening date and allocation for them will be completed within the anchor investor bid / offer period.
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