Tag: ipo

MUMBAI: The initial public offering (IPO) for life insurance behemoth LIC, through which the government is planning to mobilise about Rs 1 lakh crore, could be split into two consecutive offerings with a gap of a few months since it’s believed that the market may not have the capacity to absorb the entire issue of such mammoth size in one go.
If this plan fructifies, this will be the first of its kind move. The current Sebi rules say that promoters cannot dilute their stake to below 20% within 18 months of an IPO. It also stipulates that the promoter of a large company with a market capitalisation of Rs 1 lakh crore can take up to two years to dilute holding to 10%.

Among the options being talked about for LIC is that of cornerstone investors, marquee asset managers who could put in large funds ahead of the IPO, which is expected to be the largest in the country’s history.
Usually, government-owned companies don’t opt for any type of share placement with investors before an offer, which includes selling to cornerstone investors, pre-IPO placement to large institutions or selling part of the IPO to anchor investors a day before the issue opens.

Sources said that officials involved in the IPO process believe that with so many offers already closed and several others in the pipeline till the LIC offer comes to the market, a large amount of investors’ funds will already be absorbed.
So far in 2021, over 25 IPOs have garnered nearly Rs 70,000 crore. Paytm, the tech-enabled money transfer entity, has also filed for an IPO to mop up about Rs 16,600 crore. This would make the Paytm IPO the biggest Indian offering. Currently, Coal India’s Rs 15,475-crore IPO in 2010 is the largest.

“All the options are on the table (to make the LIC offer a success),” an official close to the transaction told TOI, without elaborating about the options. International institutions, including sovereign wealth funds and private equity funds, are seen as potential investors.
Some potential investors have reached out to get an idea of the embedded value (EV) and the EV multiple that the government is looking for in pricing.

In 2021, the Rs 9,375-crore IPO for tech-enabled food delivery services major Zomato has been the largest. The issue was subscribed over 38 times. However, the Rs 5,000-crore offer for Nuvoco Vista Copr, the cement maker run by the founders of Nirma detergent, which also happened to be the second largest IPO in 2021, struggled. It closed on August 11 with the issue subscribed just 1.7 times.
In recent times, to help the LIC offer sail through smoothly Sebi has changed some of the rules for IPOs. For example, Sebi in February said that if a company can get a post-IPO market capitalization of Rs 1 lakh crore, it could reach 10% public shareholding in two years and 25% level in five years.

Till then any company with a post-IPO market value of Rs 4,000 crore had to offer 10% of equity in the offer and reach 25% public holding in three years. The rule was perfectly in sync with the finance minister’s statement that the government will hold at least 75% in LIC up to five years post its IPO which will eventually fall to 51%.