Mumbai: State-owned insurer LIC has written a letter to the Securities & Exchange Board of India (Sebi) recently, asking for price secrecy in the bidding process for IPOs and FPOs, a source said.
“LIC wrote a letter to Sebi after the Follow-on Public Offer (FPO) of the Rural Electrification Corporation in March this year, asking the regulator for price secrecy in the French Auction bids of institutional investors,” the source closely connected to the development told PTI.
French auction gives institutional investors the freedom to place bids above the floor price and preference is given to those with higher bids.
However, LIC has said disclosure of bid prices gives unnecessary advantage to last minute entrants as in the case in the REC FPO.
For the REC FPO, the floor price was fixed at Rs203 and LIC had put in bids worth Rs3,000 crore at Rs205, R 2 more than the floor price at a time when the demand was low.
However, LIC did not get a single share as other investors put in bids above Rs205 in the last few minutes of the closing of the issue, the source said, adding, “it was a big blow to the corporation and exposed the weakness of the system.”
“To avoid any such scenario in the future, we have requested the regulator to take steps to maintain price secrecy as it will help institutional investors who quote first and also the government to get a better valuation well above the floor price,” he said.
“We have requested the regulator to take steps to ensure secrecy in bidding as it happens in any other kind of bidding process,” the source said.