Life Insurance Corporation of India (LIC), which will soon hit the market with India’s biggest initial public offer (IPO) worth nearly Rs 21,000 crore, will not be coming with a follow-on offer in the next one year, said Department of Investment and Public Asset Management (DIPAM) secretary Tuhin Kanta Pandey.
This assumes significance as the insurance behemoth will be diluting only 3.5 per cent through its maiden equity offering even as the Securities and Exchange Board of India (SEBI) has laid down that the minimum dilution at the time of an IPO has to be 5 per cent.
“We aren't going to bring in any other FPO for LIC in next one year,” said Pandey, while addressing the media to announce the public issue.
Incidentally, LIC has already received a waiver from the capital markets regulator in terms of minimum dilution at the time of launching its IPO.
The final offer size is also much lower than what was expected earlier as market volatility on the back of macroeconomic and geopolitical concerns forced the government to postpone the mega offering.
However, Pandey said that the government decided to launch the issue now only after factoring in the market situation.
“The decision to list now has taken into account a combination of multiple factors including market demand, stabilising market condition, reducing volatility, domestic flows and the corporation’s financial performance,” he said.
When asked why the government reduced the size of the offering, he said that the decision was based on factors like the market condition and also the liquidity scenario and the final size will ensure that there is a good investor response across all categories.
“This is the right size considering the capital market environment and the monetary supply within the current environment and constraints. We expect significant retail participation, in line with our vision when we first started discussing this IPO. This is an opportunity for the Indian consumer to participate in the wealth creation of one of India’s most valuable corporations,” said the 1987-batch IAS officer.
He also said that the IPO is only the “first step towards long term value creation for LIC shareholders” and that the “government is committed to provide good investment and wealth enhancing opportunities to millions of Indians.”
This is a fair and attractive valuation, he added.
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