The government has invited bids for two pre-IPO transaction advisors for India’s biggest insurer Life Insurance Corporation of India (LIC).
The last date for bids is July 13. Government-owned LIC’s public offer is expected to be the largest ever in India.
The criterion for applying is that the bidder should have advised, handled, and completed at least one transaction of IPO of a size of Rs 5,000 crore or more between April 1, 2017 and March 31, 2020.
Or it should have managed a capital market transaction of Rs 15,000 crore or more during the period.
The government is looking at listing the country's largest life insurer on domestic bourses in the January-March quarter of current financial year.
This is part of the government’s divestment plans for state-backed firms such as Air India, Bharat Petroleum Corporation Limited (BPCL) and Concor.
However, not much headway has been made due to the Covid-19 pandemic.
On February 1 this year, the government had proposed LIC IPO, which would be a major part of its highest-ever divestment target of Rs 2.10 trillion (about $29.36 billion) set in the Union Budget for 2020-2021.
According to Fitch Ratings, the proposed IPO will improve the accountability and transparency of the country's largest insurer and benefit the insurance industry.
The report by Fitch released in February viewed that “the procedural and legal bottlenecks in terms of amending certain sections of the LIC Act, conducting independent valuations as well as obtaining regulatory approvals may delay the execution beyond the government's target deadline of end-March 2021”.
LIC is fully owned by the government and has a premium-based market share of almost 70% in the life insurance sector.
According to Fitch, “LIC is one of the prominent institutional investors in several public sector assets, and in multiple instances has obtained exceptions from the insurance regulator to increase its stake in investee companies above the regulatory ownership cap of 15%.”
It also said: “In addition, we believe that the proposed IPO, once executed, could broaden the insurer's capital base and improve its regulatory capital position, which was 160% at March-end 2019, slightly above the regulatory minimum of 150%.”