As per SEBI norms, anchor investors are QIPs who buy company shares at a prior agreed price by promising to invest up to Rs 10 crore in an IPO before it opens. Each is under a 30-day lock-in period on the shares.
The Centre is looking to bring “a clutch of anchor investors” to invest up to Rs 25,000 crore in the planned initial public offering (IPO) of the Life Insurance Corporation of India (LIC), two sources told Mint.
A government official told the paper that anchor investors will be invited “after the embedded valuation exercise is done” and IPO pricing is “ready”; while another source said that there may be more than 24 anchor investors for the listing.
Moneycontrol could not independently verify the report.
The official said anchor investors will buy a portion of LIC‘s shares, meant for qualified institutional buyers (QIPs) “to help measure market demand”.
“If anchor investors pay a certain amount and the market is ready to pay more than that on the IPO day, they will have to bring in the extra amount to match the market price. If the market shows a demand of less, we don’t have to refund the extra amount to anchor investors. This is the benefit of having anchor investors," they pointed out.
The sources also said that LIC will adopt new accounting norms and undertake changes to its board structure ahead of the planned IPO, and the official noted that the company IPO’s draft red herring prospectus will be filed in six months.
Further, LIC is “aligning” its compliance processes with listing norms and will take up the changes at the “constitutional level”.
At present, the LIC board is not as per prescribed Securities and Exchange Board of India (SEBI) norms; advisors, merchant bankers and registrar for the IPO will be appointed; and the valuation exercise is also “underway” and will be “aided once annual financials are ready”, they added.
LIC did not respond to queries, as per the report.
As per SEBI norms, anchor investors are QIPs who buy company shares at a prior agreed price by promising to invest up to Rs 10 crore in an IPO before it opens. QIPs can be offered up to 50 percent of an issue and anchor investors 60 percent of this. Notably, each anchor investor is under a 30-day lock-in period on the shares.
The report noted that having anchor investors would benefit the LIC listing, due to the issue size and concern around sustained growth of the restructured entity.
It added that the “exact size of the IPO is not yet ascertained” and the official said this will be “worked out only after the embedded valuation report of LIC is ready”.