Potential Investors In LIC IPO Raise Concerns Over Govt Role, Says Report

LIC management and the IPO bankers have been peppered with questions about the insurer’s past investments and their quality, said sources

The public offering of shares by LIC is expected to open for anchor investors on March 11. Image: Getty

New Delhi: In a new development, the prospective investors in Life Insurance Corporation of India’s (LIC) $8-billion IPO are seeking assurances from the company that it will not sacrifice their interests to meet the goals set out by the government, its controlling shareholder, sources told Reuters.

In virtual roadshows for the country’s biggest ever public listing, LIC management and the IPO bankers have been peppered with questions about the insurer’s past investments and their quality, people with knowledge of the matter said.

In recent years, the state insurer has been a key buyer of shares in state-owned firms sold off by the government, often bailing out less-than-successful public issues of shares. It has also been tapped to rescue struggling financial institutions.

Potential conflicts of interest issues are taking centre-stage in the IPO roadshows that began last week and are expected to go on till the end of the month, the sources said.

Quoting Shriram Subramanian, founder of proxy advisory firm InGovern, who has not attended the roadshows, Reuters said, “The government tends to act as a regulator, manager, and shareholder and it tends to get its position confused at different points of time. The government ministries may tend to think that LIC is 100 per cent under their control and would like to exert that kind of an influence whenever required and that is a concern for investors.”

The Finance Ministry did not respond to emails seeking comment while LIC declined. The sources declined to be identified as the discussions are private.

In its draft prospectus, the insurer cited involvement of the government, which owns 100 per cent of LIC now and is expected to own about 95 per cent after the IPO, as a risk factor and said that minority shareholders could be disadvantaged by government action.

LIC Chairman M R Kumar on Monday said that potential investors should not worry about government control after the IPO as decisions are taken by its board and not by the government.