Accelerating preparation to bring in the initial public offer (IPO) of insurance behemoth Life Insurance Corporation by March 2022, the department of investment and public asset management (DIPAM) on Wednesday appointed 10 bankers, including Goldman Sachs (India) Securities and JP Morgan India.
Other bankers to work as book running lead managers for the mega IPO are ICICI Securities, JM Financial, Citigroup Global Markets India, Nomura Financial Advisory and Securities, Kotak Mahindra Capital, SBI Capital Markets, DSP Merrill Lynch and Axis Capital.
DIPAM also appointed KFintech as registrar and share transfer agent for the IPO and Concept Communication as the advertising agency. The mega IPO, which will entail part-sale of government’s stake in LIC and fresh equity issuance by the insurer, will be the largest in India.
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 had said. “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 endeavor of the GoI to attract investment from institutional investors, both domestic and global, in addition to the retail investors,” DIPAM had said.
Even though the actual size is not yet revealed, the IPO may be up to 5-10% of the equity of LIC, 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 and Rs 100,000 crore. Private valuation firm RBSA Advisors recently estimated LIC’s worth to be between Rs 9.9 and Rs 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 the Budget for FY22, the government brought in 27 amendments to 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.