Mumbai: Is India’s largest insurer, Life Insurance Corp. of India or LIC, planning to hit the capital market with a Rs2,000 crore initial public offering, or IPO?
Till Saturday, Bsepsu.com, a Bombay Stock Exchange (BSE)-run website that provides information on the share-sale plans of state-owned companies, claimed just that. The claim was removed on Sunday after Mint spoke to a senior BSE executive.
The BSE executive said the inclusion of LIC in the list was an “error”.
Interestingly, before this admission, Prithvi Haldea, chairman and managing director of Prime Database, New Delhi-based primary market tracker that provides data for Bsepsu.com, defended the insurer’s appearance in the listing, despite LIC denying any plans for a public float.
“We collect the information about public issues either from the company, Sebi (Securities and Exchange Board of India, the capital market regulator) or from publicly available reports. If any company denies the information either by writing to us or issuing a public statement, we remove the information from our database,” Haldea said on Saturday.
“We have been updating our database regularly and when LIC’s information was put out in public, they did not deny (it). The size of the public issue by LIC might be higher when it actually comes out with an IPO, as the company’s businesses have grown,” Haldea added.
A senior LIC official, however, categorically denied any plans to float an IPO.
“The information is being circulated in the public domain by BSE without our knowledge. We have to bring this issue to the notice of the government, instead of writing to BSE,” the person said on condition of anonymity as he is not the authorized spokesperson for the insurer.
Launched in January, Bsepsu.com is a database of state-owned firms, their shareholding patterns, past divestments and the amounts raised, and the names of state-owned firms that plan to raise money through share sales in the future.
Apart from LIC, the site mentions names of other state-owned insurers such as National Insurance Co. Ltd, New India Assurance Co. Ltd, Oriental Insurance Co. Ltd, and United India Insurance Co. Ltd that plan to raise money through IPOs.
LIC is one of the biggest financial institutions in the country with total assets worth in excess of Rs8 trillion at the end of 2009. Given the scale of LIC’s size and reach, any public issue by the insurer could have a significant influence on the stock market.
The issue is also a politically sensitive one as the government does not seem to be too keen to dilute its stake in LIC. A Bill to raise the ceiling on foreign investment in private insurers from 26% to 49% has also been hanging fire for years now.
Besides, before carrying out any share-sale process, the insurer needs to convert its status from a “corporation” to that of a “company”. The state-owned insurance firm was formed as a corporation in 1956 under the LIC Act.
The change in status can be done only after repealing the LIC Act, which needs the nod of Parliament. Once this is done, the insurer needs an approval from both Sebi and the insurance regulator, Insurance Regulatory and Development Authority, or Irda, for entering the capital market.
Irda and Sebi are currently in the process of drafting the IPO guidelines for insurance companies in India. A few private insurers are expected to sell shares to the public in 2010-11.
According to market intermediaries, since websites of BSE and the National Stock Exchange are used extensively across the country, the exchanges should be extremely careful for any market-related data that they put up.
“Contents on BSE and its websites are widely used by brokerages to update their own databases. To compete with NSE, the exchange launched this website on PSU (public sector units) divestments. But, it should be careful before putting out such data, as it can have huge implications if someone acts on it,” said Hiten Sampat, vice-president, institutional equities, Ohm Stock Broker Pvt. Ltd, a Mumbai-based brokerage.
“Analysts use the data provided on exchanges for preparing their research reports. Circulating such information questions the credibility of the exchange. There should be a regulatory framework to keep a tab on circulation of such information as these are used extensively by all market participants,” said K.N. Rahaman, head of research, Way2Wealth Brokers Pvt. Ltd.
Of 214 Central public sector firms and their subsidiaries, 46 are currently listed. Out of this, 44 are listed on BSE.
At the time of the launch of the website, a BSE statement quoted its managing director and chief executive Madhu Kannan, saying, “BSE has now launched this website to provide a single, updated platform to PSUs with all information relating to disinvestments and public offerings. The website also has the first ever comprehensive database of all past disinvestments.”
“This website would also be useful to academicians, researchers, investors as well as any person or organization, including the media, having an interest in the disinvestment of PSUs in India,” he had said.