lic: Cos Delay Ipo Plans To Avoid Lic Clash | India Business News

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MUMBAI: A chemical company, which had received approval from market regulator Sebi to launch an initial public offering (IPO), is slowing its capital raise plans, thanks to the upcoming mega listing of LIC which is expected to suck 10 billions of dollars from the system. Similarly, a drugmaker, which plans to give its longtime investor a partial exit via the IPO, has postponed its primary market debut.
Some of the investment bankers TOI spoke to said that several companies that have filed documents with Sebi for public disclosure are waiting for LIC’s mammoth IPO to be completed, after which they plan to launch their first public offerings. “Companies don’t want their offerings to conflict with those of LICs. We don’t expect to see another IPO to be launched until 10 days before the LIC offering opens and 15 days after it closes,” one senior investment banker said.
Equirus Chief Executive Ajay Garg said: “While the size and scale of LIC’s IPO is significant and unprecedented, let’s not forget that its timelines and potential have been communicated to the market well in advance. As a precaution, it is better for companies launching IPOs to stay away during LICs as liquidity for others will be low.
According to Garg, this is only a 2-3 week phenomenon, which is unlikely to in any way block long-term capital raising options for companies. “In all fairness, if an IPO of this scale and size materializes, it will only boost investors’ confidence in the capital markets and will significantly increase India’s leverage and contribute to greater allocation. We’re also going to see an unprecedented new set of retail investors participating in the capital market, which will be positive in the long run.
A recent report from Axis Capital indicates that 41 companies have the regulatory green light to launch their IPOs. BVG India, which deals with cleaning and maintenance of, among others, the Prime Minister’s residence, Parliament and several other facilities, plans to raise around Rs 1,300 crore through an IPO. It is delaying its plan to launch the offer. “We hope to launch our IPO by the end of March. But the IPO of LIC might lead to revising the timelines,” said BVG India Chairman HR Gaikwad. “We will reschedule the launch of the IPO based on advice from investment bankers and legal advisors regarding its timing and the applicability of the new standards, which will come into effect from April 1, 2022.”
A small number of companies are also willing to take the risk of launching an IPO just before that of the life insurer. “We plan and hope to launch our IPO in March ahead of LIC’s IPO,” said Prudent Corporate Advisory Services founder Sanjay Shah. Based in Gujarat, Prudent is one of the largest independent retail wealth management services companies (excluding banks and brokers) in India and one of the leading mutual fund distributors in terms of average assets under management and commissions received.
LIC’s IPO, expected to be the largest in the country and the fourth largest of any insurer globally, is just one of the concerns of companies looking to tap into the primary market. From April 1, new IPO standards will come into effect, which will “change the way IPOs are underwritten”, according to Arun Kejriwal of Kejriwal Research.
Sebi, among other rules, required that companies that opt ​​for an IPO saying they will acquire an entity can only use 25% of the amount raised for mergers and acquisitions, plus a maximum of 10% to general business purposes. This, the investment bankers said, will reduce the quantum of IPO size.
The government, which plans to sell 5% of LIC, has set a March deadline for listing the life insurer. Kejriwal said: “The RBI has stipulated that no investor can borrow more than Rs 1 crore to apply for an IPO. At the same time, Sebi defined the division of the IPO HNI-NII (non-institutional investor) category into two with one-third the size of the HNI tranche of IPOs for Rs 2 lakh to Rs 10 lakh, and the second bucket of two-thirds the size of the total HNI-NII portion at Rs 10 lakh and above. ”
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