Govt seeks to appoint bankers, legal advisor, registrar for LIC IPO

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“The potential size of the IPO is expected to be far larger than any precedent in Indian markets. In order to achieve a successful IPO, it is the endeavour of the GoI to attract investment from institutional investors, both domestic and global, in addition to the retail investors,” DIPAM said.

Aiming to bring the in the initial public offer (IPO) of insurance behemoth Life Insurance Corporation by March, the department of investment and public asset management (DIPAM) on Thursday invited proposals for appointment of bankers, registrar, legal adviser and advertising agency to the issue.

The mega IPO, which will entail part-sale of government’s stake in LIC and fresh equity issuance by the insurer, will be managed by 10 book running lead managers. The last date for submission of proposals for merchant bankers and registrar to the issue is August 5. The last date for submission of proposal for legal adviser and advertisement agency to the issue is August 6.

The percentage of paid-up equity to be issued/divested as part of the IPO will be determined based on the post issue capital of LIC calculated in consonance with the clause 19 (2) of the Securities Contracts (Regulation) Rules, 1957 (SCRR), DIPAM said in the request for proposal.

“The potential size of the IPO is expected to be far larger than any precedent in Indian markets. In order to achieve a successful IPO, it is the endeavour of the GoI to attract investment from institutional investors, both domestic and global, in addition to the retail investors,” DIPAM said.

Even though the actual timing of listing will be known closer to the IPO, its size will likely be in the range of 5-10%, depending on the market appetite at the time of the offer.

While the valuation of the insurer — which often plays White Knight to the government, will be known closer to the listing, it is believed to be worth Rs 8-11.5 lakh crore, meaning a 10% IPO could fetch the government anything between Rs 80,000-100,000 crore. Private valuation firm RBSA Advisors recently estimated LIC’s worth to be between Rs 9.9-11.5 lakh crore.

The government has budgeted Rs 1 lakh crore from disinvestment of government stakes in public sector financial institutions and banks in FY22. After the transition of LIC into Companies Act is completed, the IPO preparation may take at least six months before the offer hits the market.

LIC has the lion’s share in India’s insurance business with close to 70% first-year life insurance premia fetched by it, thanks partly to the comfort of sovereign guarantee.

In end-December, the government has appointed Milliman Advisors India as the reporting actuary for determining the embedded value of LIC. SBI Capital Markets and Deloitte Touche Tohmatsu India were appointed pre-IPO transaction advisors in August 2020.

In the Budget for FY22, the government brought in 27 amendments in the LIC Act to facilitate the listing. Among other tweaks, the amendments will lead to restating books of accounts in compliance with the Companies Act.

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