BackCentre to invite proposals to manage LIC’s IPO soon
The govt will soon ask investment bankers to submit proposals for managing the initial public offering of Life Insurance Corp. of India, which is poised to become the biggest share sale by an Indian company
PremiumThe government will soon ask investment bankers to submit proposals for managing the initial public offering of Life Insurance Corp. of India, which is poised to become the biggest share sale by an Indian company.
“We will issue it by the end of the month or early next month," a senior government official said on condition of anonymity.
Last week, the Union Cabinet cleared the IPO of LIC, India’s largest insurer. The government is betting on the share sale to help narrow its fiscal deficit amid rising expenditure and a slump in revenues because of the pandemic. The government has set a mammoth ₹1.75 trillion disinvestment target for the fiscal year.
The official said the government will hire multiple bankers with experience in managing large public offerings. The investment bankers will decide the size of the IPO, its structure and timing in consultation with the department of investment and public asset management (Dipam).
The bankers will also be responsible for undertaking due diligence activities, preparing the IPO documents, and completing regulatory formalities with the markets and insurance regulators, stock exchanges and Registrar of Companies. They are also expected to ensure the best return from the IPO to the government by conducting a pre-market survey, road shows to generate interest among prospective investors. They will also be underwriting the IPO, allocating shares and providing after-sale support.
While the second wave of the pandemic has delayed the disinvestment process, the government has managed to sell a 1.95% stake in Axis Bank held through SUUTI and a 7.49% stake in NMDC Ltd.
Most analysts expect the LIC share sale to be the largest by an Indian company. In a March interview, Dipam secretary Tuhin Kumar Pandey said the issue will be a large one but not more than ₹1 trillion. “The size will depend on market appetite, how much can be marketed in one go. Normally, you have got maximum issue size of ₹6,000-7,000 crore. Suddenly to expect ₹1trillion at one go may not be advisable. It can be done in a phased manner," he said.
Dipam had hired actuary firm Milliman Advisors LLP India in December to calculate the embedded value of LIC. Pandey said Dipam proposes to reserve up to 10% in the retail segment of the IPO for policyholders.
Dipam last month invited proposals to appoint legal and transaction advisers for the strategic disinvestment of IDBI Bank Ltd, in which the government has a 45.48% stake. LIC, which owns a majority 49.24% stake in the bank, expects the stake sale to unlock substantial value ahead of its IPO.
The government has in the past cleared regulatory hurdles by making changes to the Life Insurance Corporation Act, 1956. Earlier this month, the department of financial services amended the rules to allow LIC to have a chief executive officer and managing director.
A query sent to the finance ministry remained unanswered till the time of going to press.
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