LIC IPO: 60% of QIB portion may be allotted to anchor investors

Life Insurance Corporation (LIC) will allocate up to 60% of the qualified institutional buyers (QIBs) portion in the initial public offering to anchor investors on a discretionary basis, according to the draft red herring prospectus (DRHP) filed by the insurer with Sebi on Sunday.

Of this, one-third will be reserved for domestic mutual funds, subject to valid bids being received from domestic mutual funds at or above the anchor investor allocation price, it said.

In the IPO slated in March, the government has offered to sell a 5% stake in the insurer. The government will offer to sell 316.25 million shares of face value of Rs 10 each out of its total holding of about 6.32 billion shares in the insurer.

In the event of under-subscription, or non-allocation in the anchor investor portion, the balance equity shares will be added to the net QIB portion. LIC has reserved 50% of the net offer (after excluding the portion reserved for policyholders and employees) for QIBs, 15% to non-institutional bidders and 35% for retail individual bidders in accordance with the Sebi regulations.

Ahead of IPOs, anchor investors are allotted shares in a company to demonstrate healthy demand for the shares and attract other investors to the IPO.

In terms of the Sebi FPI (foreign portfolio investors) Regulations, the issue of equity shares to a single FPI or an investor group (which means the same set of ultimate beneficial owners investing through multiple entities) must be below 10% of LIC total paid-up equity share capital on a fully-diluted basis.

“Further, in terms of the FEMA Regulations, the total holding by each FPI shall be less than 10% of the total paid-up equity share capital of our corporation and the total holdings of all FPIs put together shall not exceed 24% of the paid-up equity share capital of our corporation,” LIC said in the DRHP.