India's largest insurer LIC wants opacity in the price discovery process of IPO's

Life Insurance Corporation (LIC) has requested India’s stock market regulator SEBI for price secrecy during Initial Public Offerings (IPO) and Follow on Public Offerings (FPO)s. The ostensible reason given is that the price discovery mechanism during the IPO and FPO lets investors bidding during the end of the bidding process an advantage.A specious argument in my view since all players have the same opportunity to place a last minute bid.Note that LIC is a heavy hitter in the Indian stock market and has been rumored to have bailed out India’s divestment process on more than one occasion.Its words carry significant weight and have a good probability of being implemented.This will be mostly detrimental to the retail investors who don’t have the information and access available to the larger institutions.The price demand time series information of the IPO and FPO  is perhaps the most  genuine information available to the investor.Note the Indian market has been flooded with a deluge of low quality IPOs which have performed extremely poorly. In this scenario removing this vital piece of information would put the retail investors at an additional disadvantage and most likely completely drive them away from the IPO market.

LIC seeks price secrecy for IPO, FPO bids – Economic Times

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. 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 Rs 203 and LIC had put in bids worth Rs 3,000 crore at Rs 205, Rs 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 Rs 205 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.”