Retail investors contributed most to LIC IPO success, says DIPAM secretary Tuhin Kanta Pandey

The initial public offer (IPO) of the Life Insurance Corporation (LIC) of India closed successfully on Monday evening at 7 p.m. and is expected to yield about ₹20,500 crore to the exchequer, top finance ministry officials said.

“I am pleased to inform you that the offer that was started on May 4, has closed today at 7 pm, and it has met with a tremendous success with a good response from all categories of investors, including policy holders and retail investors,” Tuhin Kanta Pandey, Secretary, Department of Investment and Public Asset Management (DIPAM) said at a press conference. The government is offloading 3.5% of its stake in the firm, whose shares are to be listed on the stock exchanges on May 17.

“This long exercise that was undertaken will eventually lead to the listing of the LIC, and not only deepen capital markets but also facilitate a large number of investors into publicly owned companies and policy holders have also supported this exercise remarkably,” Mr. Pandey said. “Let us hope that everything goes well on the listing day,” he added.

Asserting that the issue was largely subscribed by domestic investors, the DIPAM Secretary said it can be considered an example of ‘AtmaNirbhar Bharat’ that such a large issue has been organised smoothly with investors across the country showing the capacity to deliver “rather than just depend on foreign institutional investors”. “Predominantly, this has been led by domestic investors,” he said.

Though the issue size was pegged at ₹21,000 crore, the government expects to raise ₹20,500 crore from the IPO because of the discounts offered to retail investors and policy holders. The exact amount will be worked out once applications are vetted and the allotment process is complete, a senior DIPAM official said.

Mr. Pandey shrugged aside concerns raised by Opposition parties on the valuation of the LIC shares, stressing that everyone is free to analyse this, but this was not the right time to comment as the issue has closed.

“We kept the issue size keeping in mind the current market environment and the consideration that it should not crowd out other investments. There is always an issue of the right time, but the IPO has been successfully pulled off,” he emphasized.  

To a query on the sharp decline in benchmark indices as well as the Rupee, on the last day of the LIC IPO window, he said market conditions are what they are due to a lot of geopolitical and other factors.

Sanjay Malhotra, Secretary, Department of Financial Services (DFS) said that the pricing of the LIC IPO was done, keeping in view the core intrinsic value and future potential of growth, not day-to-day fluctuations. “We should not see it on a day to day basis of what the pricing will be on the day of the IPO (listing) but the long term and medium term. We are hopeful that the value that we have offered should give decent returns over the short, medium and long term,” he said.

Asked if LIC’s listing would pave the way for lesser government intervention in LIC’s decisions, Mr. Malhotra asserted that the company has always been managed through a professional board and denied decisions were taken at the behest of the government.

“I would totally deny that. Sometimes, the judgement taken by the independent board on some decisions can go wrong. We talk about those rather than the good decisions that yield good returns. I would like to assure you that we are not aware of such decisions,” Mr. Malhotra said.

“Going forward, also, the board will be professionally managed and decisions will be taken in the interest of policy holders, who are supreme. The Corporation exists for the customers, if they are not there, shareholders will not be there. But shareholders’ interests will also need to be looked at, to move forward,” he concluded.

“LIC will have to balance the interests of shareholders and policyholders and am sure the LIC has a competent board which will definitely look into this,” Mr. Pandey said.