The government is planning to split the proposed
initial public offering (IPO) of life insurance powerhouse LIC, through which
it plans to raise approximately Rs 1 lakh crore, into two consecutive offerings
separated by a few months because it is believed that the market may not be
able to absorb the entire issue in one go.
If this idea works as planned, it will be the first of
its sort. According to existing SEBI guidelines, promoters cannot reduce
their ownership to less than 20% within 18 months after an IPO. It further
states that the promoter of a huge firm with a market value of Rs 1 lakh crore
can take up to two years to reduce his or her stake to 10%.
Cornerstone investors, prominent asset managers who
may put in substantial sums ahead of the IPO, which is projected to be the
largest in the country's history, are among the alternatives being discussed
It is worth noting that government-owned enterprises
do not engage in any sort of pre-IPO share placement with investors, including
selling to cornerstone investors, pre-IPO placement to large institutions, or
selling a portion of the IPO to anchor investors a day before the issue opens.
Authorities participating in the IPO process anticipate
that with so many offers already closed and several more in the queue until the
LIC offer hits the market, a considerable portion of investors' funds will have
already been consumed.
It should be highlighted that over 25 IPOs had raised
approximately Rs 70,000 crore in 2021. Paytm, a tech-enabled money transfer
company, has also filed for an IPO of Rs 16,600 crore. This would make the
Paytm IPO the largest in India. The largest IPO until now has been Coal India's
Rs 15,475-crore IPO in 2010.
“All alternatives are on the table (to make the
LIC offer a success),” an official close to LIC transactions said.