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Govt issues RFPs for merchant bankers, legal advisors, others for LIC IPO ‘larger than any’

Our Bureau | Updated on July 15, 2021

Size of IPO expected to be larger than any precedent in Indian markets, says DIPAM

The government on Thursday floated Requests for Proposals (RFPs) for the appointment of a merchant banker, legal advisor, registrar and share transfer agent, and an advertisement agency to take forward the IPO of LIC .

One common element in three of the tender documents is: “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 endeavour of the GoI to attract investment from institutional investors, both domestic and global, in addition to the retail investors.” This is missing in the RFP for legal advisors. Bids for merchant bankers and registrar and share transfer agent will open on August 6, and that for the other two on August 9.

Read also: Centre’s big push to LIC’s mega IPO

All the four RFPs mention that the listing of shares of Life Insurance Corporation would entail part-sale of government’s stake and fresh equity raise through a prospectus based Initial Public Offer] as per SEBI Rules and Regulations. But there is no mention of percentage of the shares to be offloaded.

“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 Clause 19 (2) of the Securities Contracts (Regulation) Rules, 1957. A part of the public offering may be reserved for employees and policyholders of LIC,” the introduction section of the RFPs said.

CCEA nod

Last week, the Cabinet Committee on Economic Affairs (CCEA) gave ‘in-principle approval’ to the LIC IPO. Although the timeline has not been set, it is expected to hit the market in the fourth quarter of FY22. The Government has already notified all amendments to the LIC Act, 1956 to facilitate the IPO.

Earlier, based on SEBI decisions, the Finance Ministry had relaxed norms for large companies planning to enter the stock market.

On December 31, the government appointed Milliman Advisors LLP India as the Reporting Actuary for the Embedded Value of LIC. The IEV measures the consolidated value of shareholders’ interest in the life insurance business within the meaning of the Insurance Act, 1938, and applicable IRDAI regulations. It is one of the pre-conditions of the IPO for LIC, and needs to be determined by an independent actuary.

The IPO of LIC is critical as the government needs more resources to meet the higher expenditure this fiscal year due to the Covid-19 pandemic. Though tax collection has been robust as on the date, there is still uncertainty around it sustaining.

The government has set a target of raising ₹1.75-lakh crore through disinvestment, out of which stake sale in public sector banks and financial institutions is to fetch ₹1-lakh crore. As on date, the government has collected ₹7,645.7 crore through disinvestment.

Published on July 15, 2021

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