Home >Markets >Centre invites proposals to manage LIC public listing

Government has invited proposals for appointing investment bankers, legal advisers, registrar and share transfer agent (RTA) and an advertising agency 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.

Last week, the Union Cabinet cleared the IPO of LIC, India’s largest insurer which is expected to be listed in stock exchanges in the March quarter of FY22. 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 listing of shares of the LICI (Life Insurance Corporation of India) on stock exchanges would entail part-sale of Government’s stake in LICI and to raise fresh equity share capital for LICI, through a prospectus based “Initial Public Offer" (IPO) in the domestic market as per SEBI Rules and Regulations. The potential size of the IPO is expected to be larger than any precedent in Indian Markets. In order to achieve a successful IPO, it is the endeavor of the GoI to attract investment from institutional investors, both domestic and global, in addition to the retail investors," the department of investment and public asset management (Dipam) said in bid documents put out on its website.

DIPAM said the percentage of paid-up equity to be issued as part of the IPO will be determined later. “A part of the public offering may be reserved for employees and policyholders of LICI," it added.

In her FY21 Budget speech, Finance Minister Nirmala Sitharaman first revealed government’s plan to list LIC in stock exchanges, holding that listing of companies on stock exchanges discipline a company, provides access to financial markets and unlocks its value and gives opportunity for retail investors to participate in the wealth so created.

LIC has three branches outside India in UK, Fiji and Mauritius, a wholly owned subsidiary in Singapore and Joint Ventures in Bahrain, Kenya, Sri Lanka, Nepal, Saudi Arabia and Bangladesh. Its subsidiaries in India include LIC Pension Fund Ltd, and LIC Cards Services Ltd. Its associates include IDBI Bank Ltd, LIC Mutual Fund and LIC Housing Finance Limited. Government’s decision to privatise IDBI Bank is expected to further unlock value for LIC.

DIPAM on Thursday said it will appoint up to 10 investment bankers with requisite experience in public offering, who together will form a team and would be called Book Running Lead Managers (BRLMs). Interested bidders must have handled at least one transaction of IPO of a size of 5000 crore or more and have managed at least one equity capital market transaction or should have managed at least one offer for sale or qualified institutional placement of 15,000 crore or more.

“The short-listed bidders would be required to demonstrate their credentials before an Inter-Ministerial Group (IMG) through a presentation, covering the areas/ criteria listed above. The IMG would evaluate the Bidders on the criteria mentioned based on their presentation and Proposals received and shortlist them for the purpose of opening of their Financial Bids," DIPAM said.

Bids can be submitted till 5 August and on 6 August bids will be opened.

The investment bankers will decide the size of the IPO, its structure and timing in consultation with 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.

Bids have also been invited from domestic law firm who will act as the legal adviser to the transaction and should submit proposal in consortium with an international law firm of repute, with similar experience and expertise in public offerings in capital markets. The domestic legal adviser will be responsible for drafting of the Draft Red Herring Prospectus, Red Herring Prospectus and the final Prospectus for filing with SEBI, stock exchanges while the foreign legal adviser will be responsible for drafting of selling restrictions in the jurisdictions where the international marketing shall be done and filing of necessary documents in other jurisdictions.

DIPAM has also sought service of an advertising agency with experience and expertise in public offerings in capital markets to conceptualize, design and develop 360 degree media campaigns across platforms. The registrar and share transfer agent will assist the issuer in the entire process of IPO including issuance of dematerialized paid-up equity shares to the government.

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