LIC, GIC to bid for 10-15% of PSU issues

No goverment pressure, says LIC chairman S.B. Mathur.

Life Insurance Corporation of India (LIC) and General Insurance Corporation of India (GIC) have received board approval to bid for 10-15 per cent of each of the public sector undertakings' issues

"We cannot find a better opportunity to invest in such financially sound companies," said a senior executive at one insurance company.

"Our board gave us approval 15 days back to invest in these public offerings. Our participation will be significant," an LIC executive said.

Most state-owned banks, too, are subscribing to the issues in a modest way.

"We are investing in the primary market, though not very aggressively. It's not a token investment either," said a senior State Bank of India executive.

Bank of Baroda Chairman P S Shenoy and Bank of India Chairman M Venugopalan, too, confirmed that their banks were putting money in the public issues.

"We can put up to 5 per cent of our advances or 20 per cent of our net worth in the equity market. We are far below that limit," said Venugopalan.

Financial institutions (FIs) are waiting till the last day to invest in the public issues that are part of the government's divestment programme.

"Investing on the last day helps us gauge the market behaviour in terms of pricing and, accordingly, this influences our bidding price," said senior executives at a financial institution.

The book-building process for IPCL's 71.8 million share issue closed today with heavy subscription from GIC and LIC, sources in financial institutions said.

The state insurance companies were net sellers in the market in the past few months, as they cashed in on the bull run. "We have significant margins to invest in the public offerings," said a senior insurance executive.

LIC currently has a nominal stake in the five state-owned companies -- IPCL, CMC, IBP, Dredging Corporation of India and Gail -- varying from 0.25 per cent to 1 per cent of their total share capital.

IPCL is tapping the market with an issue of 71.8 million shares (Rs 10 face value and Rs 170 floor price). CMC is in the capital market with an issue of 3.976 million shares (Rs 10 face value and Rs 475 floor price). IBP is also in the market with an issue size of 5.758 million shares (Rs 10 face value and Rs 620 floor price).