The government aims to carry in the grab of anchor investors to invest up to Rs.25000 crore in the share of LIC (Life Insurance Corp. of India) in its mega IPO (Initial public offering).
The biggest insurer in the country will undergo replacement of its board structure and accept modern accounting norms prior to the IPO.
The government official said that they will invite the anchor investors after the immersed valuation exercise is complete. And, the other people said that maybe there are more than a dozen investors in the IPO of LIC.
Anchor investors are lead to increase the investor’s confidence and measure the demand for IPO. Getting anchor investors can be crucial for the LIC as the state-run insurer size and alterations adopted by it. And, it may make the investors of IPO concerned regarding the insurer’s capability to sustain its development under the restructured LIC avatar. A 10% stake in the business is approximated to be worth a minimum of Rs.1 million that is huge for the Indian equity market.
Anchor investors will purchase the shares of LIC to assist measure demand for the market. They will also purchase the share portion which is meant for QIB (qualified institutional buyers). In case, anchor investors pay a particular amount and the market is prepared to pay more than the IPO day, then anchor investors will have to carry in the additional amount to match with the market rate. In case, the market shows less demand, then they don’t refund the additional amount to the anchor investors. As per the official, it is the advantage of having anchor investors.
Anchor investors are qualified institutional buyers who accept to purchase the shares of the company at a certain price by requesting to invest a minimum of Rs.10 crore in the IPO prior to it opens. And, 50% of the IPO shares can be given to QIB’s, up to 60% can be issued to anchor investors. And, one-third part of it is reserved for mutual funds.
Allotment to anchor investors is complete on a volunteer basis for IPO over RS.250 crore. There is no cap on the number of anchor investors and an extra 10 investors are permitted for an extra Rs.250 crore of size, and Rs.5 crore is the smallest allotment for every such investor.
As per Sebi, there are 30 days lock-in on shares for each anchor investor.
The IPO of LIC is critical divestment for the government to take non-tax revenue, narrow the fiscal deficit of the country, and pay back for budgetary expenses.
LIC requires to modify its financial reporting structure by integrated the financials of its several businesses. LIC has a pension fund company, overseas business, and mutual fund company.
LIC in which the government had 95% of its stake, is the biggest insurer in the country along with assets of more than Rs.34 trillion. The insurer recorded a latest business premium of Rs.1.84 trillion for fiscal 2021, that is approximately double the premium gathered by private insurer together. LIC commands a 67% market share in the space of life insurance.
LIC public listing has been delayed as it needs amendment of various LIC to act sections in the terms of the method the corporation manages its distributes dividends, corpus, and give government guarantees on policies. At the current time, LIC pays a surplus of 5% to the government, and the rest 95% goes to the policyholders. And, the private insurance company pays a surplus of 10% to shareholders, and the remaining goes to policyholders.
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