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). According to officials, the funds had shown interest and the government wants to confirm their participation.
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. The government is keen on their participation as these funds are stable investors with a long-term horizon.
The government has 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 £25 million. At an estimated embedded value of £54 billion, the Centre may raise £6-7 billion through the 5% stake sale in LIC. The anchor investment portion is expected to be around £1.8 billion.
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.
