Centre pulls all stops for ‘breath-taking’ LIC IPO

The central government is taking all steps to ensure Life Insurance Corporation’s (LIC) initial public offering (IPO) is a success. These include marketing efforts such as sending text messages to people and publishing advertisements in newspapers to ensure the maximum people invest in it.

Authorities will review and amend rules on foreign direct investment to make it easier to lure investors from abroad, a report in Bloomberg said, quoting an official. Equity stakes among foreigners are allowed for most Indian insurers, but not in LIC, which is a special entity created by an act of Parliament, the report informed.

The IPO can raise between Rs 40,000 crore ($5.4 billion) and Rs 1 lakh crore this quarter, and its proceeds are essential for the Modi government to reach a budget-deficit target.

“The size of LIC is breath-taking,” Abhay Agarwal, fund manager at Mumbai-based Piper Serica Advisors Pvt was quoted as saying. While it might be easy for the government to make regulatory amendments needed for the IPO, “it will require significant marketing efforts to cross the Rs 50,000 crore line,” he added.

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In a recent notice published by LIC on the official website, policyholders have been asked to update their details like PAN number and to create or link their existing Demat account to participate in the IPO.

“The government will also need to learn from its past mistake of pricing public sector IPOs too high,” Piper Serica’s Abhay Agarwal reportedly said. “The valuation will have to leave enough on the table for investors to attract them to the IPO.”

The Centre will allow 20 per cent foreign direct investment in LIC, like in the case of public sector banks, a report in Business Standard said.