These Companies Have Delayed Their IPOs to Steer Clear of Clash with LIC’s Mega IPO

With LIC‘s mega Initial Public Offering (IPO) forthcoming, several companies have delayed their plans to open their IPOs. This is because LIC’s mega listing will reduce the liquidity of around $10 billion from the system. That is why many companies which had their draft papers approved by SEBI will wait for a while to successfully launch their IPOs.

According to several merchant bankers, no company has planned to launch IPOs for up to 10 days before the LIC’s IPO opens and 15 days after it closes. As there was ample time for the market to realise LIC IPO’s size and scale, most companies will wait out 2-3 weeks as it happens.

Now let us go through the list of companies that have delayed their IPOs.

List of IPOs Which Had Their Opening Dates Altered to Avoid Clash with LIC

The following are some IPOs that have recently delayed/advanced their opening time frame.

• BVG India: The cleaning and maintenance company is employed at the Prime Minister’s residence and Parliament House. Its Rs. 1,300 crores IPO was supposed to launch by the end of March 2022, but now, it will launch after 1 April 2022.

• Delhivery: The Softbank-backed logistics firm planned to raise Rs. 7,640 crores via a fresh issuance of Rs. 5,000 crores and an OFS (offer for sale) of Rs. 2,460 crores. However, Delhivery has delayed its listing to the next fiscal starting April 2022 and may reconsider its listing plan.

• PharmEasy: This pharmaceutical company plans to raise at least Rs. 6,250 crores via fresh issuance of shares. The company is yet to get SEBI’s approval but had plans for listing after clearance this year. It has decided to readjust its valuation and open its IPO next financial year.

• Droom Technologies: This automobile e-commerce platform for second-hand vehicles filed its draft papers for an Rs. 3,000 crores IPO in November 2021. However, now it may have delayed its plans for an IPO.

• Prudent Corporate Advisory Services: The Gujarat Based retail wealth management firm planned to float a pure OFS of 85.4 lakh equity shares. This company has decided to expedite its IPO ahead of LIC’s mega IPO.

• Druva Inc.: Founded in India, this is a software company selling cloud-based services. It raised around $147 million from investors like CDPQ and Neuberger Berman in 2021. It had plans to open an IPO in the USA but has decided to put it off for now.

The fate of the upcoming mega IPO of LIC is a big unknown that will decide the fate of IPOs in India. Its success would bolster investors’ confidence and help with more allocation to the capital markets. Now let us look at the details of LIC’s IPO.

A Brief Overview of LIC’s Upcoming IPO

India’s largest life insurer will open the biggest ever IPO in the nation’s history and the world’s fourth-biggest IPO. The Government of India (GOI) plans to dilute 5% of its stake, around 31.6 crores shares, through this IPO. This will help it raise Rs. 75,000 crores or $10 billion approximately.

The IPO will be a pure OFS with no fresh issuance of shares and is supposed to hit the market by March 2022. This will help the Government of India meet the disinvestment target of Rs. 1.75 lakh crores in the current financial year. The book running lead managers (BRLM) of this issue includes:

• ICICI Securities

• Axis Bank

• SBI Capital Markets

• Kotak Mahindra

• JM Financials

• JP Morgan

• Nomura

• Bank of America Securities

• Goldman Sachs

• Citi Group

According to its DRHP (draft red herring prospectus), LIC has reserved half of its total allocation for Qualified Institutional Buyers (QIBs) and anchor investors. 35% of the entire issue is allocated towards retail investors, while 15% of the allocation is for Non-Institutional Investors (NIIs). The IPO also has a 10% allocation for the company’s policyholders and a 5% for its employees.

Anyone holding any LIC policy is eligible for the policyholders’ allocation and a discounted price for the IPO. However, they must not have opted for maturity, surrender or death benefit before 13 February 2022. Eligible policyholders can apply for a maximum allocation of shares worth Rs. 2,00,000 through the category reserved for them.

Final Thoughts

After two years of record growth, market investors are showing signs of concern after the battering received by newly listed companies on the stock exchanges. A calamitous debut of the fintech firm Paytm and tanking of shares of Zomato and Nykaa only added fuel to investors’ fears.

As many investors long for stable returns and profitability, LIC’s mega IPO stands as the major deciding factor for the Indian market. Its massive size and scale may take out liquidity from the market in the short term. However, in the long-term, its success would reinforce the confidence of investors in the capital market, leading to the entry of many new investors.

Frequently Asked Questions

1. Which new norms of SEBI will apply for IPOs from 1 April 2022?

SEBI has mandated that companies raising funds via IPOs can use up to 10% of their funds for general corporate purposes. Moreover, only 25% of funds raised can be used for mergers and acquisitions (M&A), which would reduce IPO sizes.

2. What new SEBI rules will apply to anchor investors?

Half of the investment of anchor investors will remain locked for 30 days. The other half will stay locked for 90 days as per new SEBI norms.

3. Has OYO Hotels received approval to open its IPO?

No, the approval for OYO’s DRHP has been pending for the past five months. The company came under scrutiny for heavy losses and ownership structure last year. Now, the market regulator is making queries about the company’s ongoing litigation with Zostel Hospitality Pvt.

4. Which companies still have valid approvals for IPO from SEBI?

Around 41 companies have SEBI’s approval to launch their IPOs this year. This includes companies such as:

• One Mobikwik

• Delhivery

• Global Health

• Keventer Agro

• VLCC

• Sterlite Power

• Go Airlines

• Emcure Pharma

5. When does OLA plan to launch its IPO?

The ride-hailing company OLA has plans to open its Rs. 15,000 crores IPO in the first half of 2022.

Disclaimer: This blog is exclusively for educational purposes and does not provide any advice/tips on investment or recommend buying and selling any stock.