Govt's 3.5% stake sale plan in LIC gets Sebi approval

Mumbai: The capital markets regulator has relaxed certain requirements for the initial public offering of Life Insurance Corp of India (LIC). The Securities and Exchange Board of India (Sebi) has allowed the government to divest 3.5% in the insurer, exempting it from the mandatory 5% stake sale for large issues.

Anchor investors in LIC's listing have been exempted from the recently introduced tighter lock-in requirement for the shares allotted to them, said two people with the direct knowledge of the matter.

Separately, the Reserve Bank of India (RBI) has, however, rejected LIC's request to allow non-banking finance companies (NBFCs) to lend more than ₹1 crore to investors wanting to put their money in the IPO. From April 1, finance companies cannot lend more than ₹1 crore per borrower for IPO.

Notification on Lock-in Rules Soon
Emails sent to Sebi, LIC and RBI didn't elicit any response till press time.

According to Sebi rules, if the post-issue capital of a company is above Rs 1 lakh crore, it is required to offer 5% of equity plus issue shares worth Rs 5,000 crore in the IPO.

LIC, which has a valuation of Rs 6 lakh crore, is raising Rs 21,000 crore through its public offer. The issue, which is scheduled to open on May 4, is expected to be priced in the band of Rs 902-949 per share with a discount of Rs 45 for retail investors and Rs 60 for policyholders.

Before the IPO, Sebi will come up with a notification to exempt LIC's IPO from the tighter rules on anchor investors. From April 1, the market regulator had said that 50% of the shares allotted to anchor investors will be locked-in for 90 days and the remaining 50% will have a 30-day lock-in period. Earlier, there was a requirement of 30-day lock-in for anchor investors.

Sebi is now expected to allow a 30-day lock-in to anchor investors from the date of allotment of LIC's shares, said one of the people quoted above.

"A notification on anchor investors will come out soon," said the person.

ET had reported in its April 22 edition that the Sebi board on March 29 had discussed the proposal to exempt all IPOs with sizes above Rs 10,000 crore from the stricter anchor investor norms till July 1, 2022.

It had received representations from market participants about several large institutional investors being averse to longer lock-in periods for their investments. The regulator, however, did not take a decision on the matter in that meeting.

The RBI has stuck to its rules on IPO funding by NBFCs. Until recently, wealthy investors borrowed money from large NBFCs to pump money into IPOs. NBFCs in turn borrow through commercial papers, or shorter duration debt securities ranging from seven to 10 days.

The central bank felt the arrangement posed potential risks to the financial system while critics argued the system created artificial demand for several IPOs in the high networth investor (HNI) category.