The initial public offering (IPO) of India’s Life Insurance Corporation (LIC) successfully closed at 7pm Monday night and is expected to raise about 20,500 crore for the treasury, senior Treasury officials said.
“I am pleased to report that the offering, which was launched on May 4th, closed at 7pm today and has been a tremendous success with a good response from all categories of investors including policyholders and retail investors, Tuhin Kanta Pandey, Secretary, Department of Investment and Public Asset Management (DIPAM), told a news conference. The government is giving up 3.5% of its stake in the company, whose shares are set to go public on May 17.
“This lengthy exercise that has been undertaken will eventually result in the listing of the LIC and will not only deepen capital markets but also allow a large number of investors access to listed companies and policyholders have also given remarkable support to this exercise,” said Mr. Pandey . “Let’s hope everything goes well on trading day,” he added.
DIPAM Secretary claimed that the issue was largely subscribed by domestic investors and said it could be taken as an example of “AtmaNirbhar Bharat” that such a large issue was organized smoothly, with investors across the country showing the ability ” instead of just depending on foreign institutional investors”. “This was predominantly led by domestic investors,” he said.
Although the issue size was set at 21,000 crore, the government expects to raise 20,500 crore from the IPO due to rebates offered to retail investors and policyholders. The exact amount will be worked out once applications are reviewed and the allocation process is complete, a senior DIPAM official said.
Mr. Pandey brushed aside concerns from opposition parties about the valuation of LIC shares, stressing that anyone is free to analyze this but this is not the right time to comment as the matter is closed.
“We have maintained the issuance size taking into account the current market environment and the consideration that it should not crowd out other investments. It’s always a matter of timing, but the IPO went through successfully,” he emphasized.
When asked about the sharp decline in the benchmark indices as well as the rupee, he said on the last day of the LIC IPO window that market conditions are the way they are due to many geopolitical and other factors.
Sanjay Malhotra, Secretary of the Department of Financial Services (DFS), said that LIC’s IPO was priced taking into account intrinsic core value and future growth potential, rather than daily fluctuations. “We shouldn’t be looking at day-to-day what prices will be like on IPO (listing) day, but over the long-term and medium-term. We hope that the value we have offered will bring reasonable returns in the short, medium and long term,” he said.
Asked whether listing LIC would pave the way for less government intervention in LIC’s decisions, Mr Malhotra assured that the company has always been run by a professional board and denied that decisions were made at the government’s behest be.
“I would completely deny that. Sometimes the judgment of the independent panel can go wrong on some decisions. We’re talking about these rather than the good decisions that bring good returns. I would like to assure you that we are not aware of any such decisions,” Mr Malhotra said.
“The Board of Directors will continue to be managed professionally and decisions will be made in the interests of policyholders, which have top priority. The company exists for the customers, if they aren’t there, the shareholders won’t be there. But shareholder interests must also be considered to move forward,” he concluded.
“LIC will need to balance the interests of shareholders and policyholders and I am confident that the LIC has a competent board that will definitely look into this,” said Mr. Pandey.