Ministry hires advisors for IPO of Life Insurance Corporation

07 September 2020 Consultancy.in

Deloitte and SBI Capital Markets have reportedly won the contract to manage what could be the largest initial public offering (IPO) in the history of India’s capital market – that of the Life Insurance Corporation (LIC). 

LIC is the largest insurance company in India, currently generating steadily profits, and in control of assets valued at more than Rs. 300,000 crores. The government made the decision to divest part of the state-owned corporation earlier this year, and even the floatation of 10% of LIC could make it the largest IPO in India’s capital market history.

In June, the government invited bids from the consulting sector to manage the mammoth IPO. Specifically, the mandate was to handle the transaction modalities, and devise the timing, structure and value optimisation of the deal, while also managing the groundwork of the transaction.

A July 13th deadline was set for the bids, and the government had set an upper limit of two advisors to be selected from a consulting, investment banking or financial background. Having had a few weeks to review the bids, the Economic Times reports that the government has selected Deloitte and SBI Capital Markets to manage the deal.

Ministry hires advisors for IPO of Life Insurance Corporation

Part of the Big Four club of accounting and advisory firms, Deloitte has significant experience divesting assets for India’s public sector. The firm is currently engaged in privatisation efforts for the power industry, and has previously been involved with the State Bank of India to manage non-performing assets to the tune of Rs. 250,000 crore. This substantial experience will no doubt come in handy for Deloitte as it embarks on this mammoth project.

As it stands, the plan is to finalise the IPO between January and March next year, as part of a broader divestment drive announced by the government in this year’s budget, with the objective of raising capital. Alongside LIC, the government is also looking to divest stressed securities in IDBI Bank.

Together, the LIC and IDBI divestments are expected to raise upwards of Rs. 90,000 crore. At the same time, other non-performing government entities such as Air India and BPCL are all on the market, with hopes to take the amount of raised capital past the Rs. 100,000 crore mark.

Provided that things stay on track, the capital raised will be a much-needed injection into a pandemic-stricken economy. Recent reports have pegged India’s GDP loss at well over 20% since the start of this year, and the government now has to execute a complex and unprecedented economic recovery.

While the LIC IPO will be a bright spot, a number of divestments that were planned for this year have all be delayed due to the crisis and its economic disruption. It remains to be seen how the situation unfolds in the lead up to the deadline for early next year.


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