LIC eyes investments from corporate and bank treasuries in IPO

Insurance behemoth has over 1% holding in 47 Nifty50 firms

Life Insurance Corporation of India (LIC) is pulling out all stops to ensure its Rs 21,000-crore initial public offering (IPO) is a success. The insurance behemoth is hopeful that the country’s large corporate and bank treasuries will submit bids in its IPO, which will hit the market on Wednesday.

LIC is the largest non-promoter shareholder in several Indian companies. In fact, the state-owned insurer holds more than 1 per cent stake in 47 Nifty50 companies. LIC’s cumulative holding in these 47 companies is over Rs 7.4 trillion.

“Most of the companies that we have invested in have done well. Many of them are good dividend paying stocks. We have a buy and hold strategy and don’t churn as much. Not necessarily all of them will pitch in for LIC IPO. But there are some good names, some with good treasuries. If you take any listed banks, they also have their treasury segment, equity segment. We believe they will act,” said MR Kumar, LIC chairman.

NII quota

Corporates are allowed to invest in the so-called non-institutional investor (NII) portion of any IPO. About 15 per cent of the shares are reserved for NIIs. Individuals placing bids in excess of Rs 2 lakh are also clubbed into this category —commonly referred to as high networth individual (HNI) quota.

For LIC’s IPO, about 29.65 million shares worth Rs 2,814 crore at the upper end of the price band are available in the NII quota, according to the offer document.

The company and the investment banks assisting in its IPO are hopeful that banks and corporate treasuries will subscribe to over a third of the shares available in the NII quota. However, given the volatility in the secondary market and the large issue size, they are expecting contributions from across investor categories and not just relying on any single category. 

The breakdown

Shares worth about Rs 9,379 crore will be available under the so-called qualified institutional buyer (QIB) segment. Of this, nearly Rs 5,600 crore can be allotted to anchor investors. Meanwhile, shares worth Rs 6,565 crore are reserved for retail investors (those investing up to Rs 2 lakh); Rs 2,100 crore for policyholders and another Rs 150 crore for employees.

“The investor interest has been quite good. It is especially good as far as the domestic investors are concerned. Foreign institutional investors (FIIs) have concerns. But long-only funds don’t mind because they know they are not parking money to take it out next year. So, they are going to put in money for the long haul,” Kumar said.

At the end of the December quarter, LIC had equity ownership of over a per cent in 278 listed companies worth Rs 9.53 trillion, according to Prime Database. Given LIC’s large and diverse equity shareholding, Kumar likens the company to an exchange-traded fund (ETF).

“I would sell my stock by saying that every share of LIC is more like an ETF, or balanced fund. Most of our investments have done well,” he said.