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LIC IPO: Centre wooing sovereign, pension funds

India has sounded out Abu Dhabi Investment Authority, Singapore-based GIC, three Canadian pension funds and Qatar Investment Authority among other sovereign wealth funds and pension funds on being anchor investors in Life Insurance Corporation (LIC) of India’s initial public offer (IPO).

The funds had shown interest and the government wants to confirm their participation, said officials involved in the offer. ET had reported earlier this week that the IPO is likely to be held toward the end of this month.

“Many leading sovereign funds have expressed interest in the LIC IPO. Merchant bankers are in advanced discussions with them for being anchor investors in the issue,” one of the officials told ET. The government is keen on their participation as these funds are stable investors with a long-term horizon, the person said. The government had reached out to about 180 potential anchor investors during roadshows. Officials feel at least 8-10 big-ticket foreign investors will be required as anchor investors for the IPO, set to be the biggest ever Indian public offer.

In December last year, the Securities and Exchange Board of India (Sebi) had extended the lock-in period for anchor investors to 90 days from 30 days earlier. The market regulator also removed restrictions on the maximum number of anchor investors for public issues in excess of 250 crore. At an estimated embedded value of Rs 5.4 lakh crore, the Centre may raise Rs 60,000-70,000 crore through the 5% stake sale in LIC. The anchor investment portion is expected to be around Rs 18,000 crore.

According to the draft red herring prospectus (DRHP) filed with Sebi, the insurer will allocate 60% of the qualified institutional buyers’ (QIBs) portion to anchor investors on a discretionary basis. Strong anchor investments give confidence to retail and other institutional investors, helping generate demand for IPO when it opens to the general public.

The official said that while the discussions were going on, there is still no firm commitment on the quantum of the investment they were likely to make. “That will happen when we zero in on the final issue price and when it is communicated to them.

The process is on and we will do it soon,” the official said, without giving a timeline. One key consideration is the listing price and the market capitalisation at that level. Anything below `10.7 lakh crore valuation at listing can make inclusion in the MSCI index difficult, said the official. The government has budgeted Rs 65,000 crore from disinvestment in the current financial year.

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