Finance Ministry seeks advisors for mammoth LIC floatation

24 June 2020 2 min. read

India’s Finance Ministry is looking to bring in transaction advisors and consulting firms on board for what is set to be the largest IPO in the history of India’s capital markets – that of state backed insurance entity Life Insurance Corporation (LIC).

There is a July 13th deadline for bids, and the ministry has indicated that it will appoint a maximum of two advisory firms for the “pre-IPO” transaction. Investment banks, financial institutions, consulting firms and boutiques will all be considered for the role, which is likely to be a lucrative one.

As of the last financial year, LIC’s assets were valued at more than Rs. 300,000 crores, which means that the IPO is set to be the largest in the history of India’s vibrant capital market, even if the ministry decides to float less than 10% of LIC’s shares. The entity is also steadily profitable.

It comes as no surprise that experience is a key criteria for the ministry when selecting an advisor. Bids are welcomed from consultants that have at least one IPO transaction worth Rs. 5,000 or more under their belt since 2017. Alternatively, candidates should have experience managing a capital market transaction of over Rs. 15,000 crore, also between 2017 and now.

Life Insurance Corporation

The selected advisors will manage modalities for the transaction, be responsible for timing, develop the deal structure, and make recommendations on value optimisation, all while managing a range of other workstreams of the transaction process. The government hopes to have the company listed between January and March next year.

The LIC IPO is part of grander disinvestment plans from the current government and was announced in the most recent budget statement, alongside a sale of stressed equity in IDBI bank. According to The Indian Express, the governments aims to raise a combined more than Rs. 90,000 crore from the two divestments.

Meanwhile, the government has initiated a range of other divestments, including those of Air India – which has been in the works for some time now – as well as BPCL. These divestments, alongside a number of others being planned, are expected to raise more than Rs. 100,000 crore.

While the government and the appointed advisors will aim to round up the LIC IPO on time, other government disinvestment plans have been delayed significantly since the start of this year, mostly owing to the Covid-19 crisis. As the economy reopens and emerges from the crisis, the government will hope that it can bring its plans back on track.