LIC IPO process kick-starts; FinMin sets the ball rolling on mega disinvestment

Kicking-off preparation of the mega Life Insurance Corporation of India (LIC) initial public offering, the Finance Ministry today invited bids from consulting firms, investment bankers, and financial institutions. The bids have been invited for advising the government on the proposed IPO which will see the government divest part of its stake. IPO of the massive insurance company may easily make it one of the top listed companies on the stock exchanges in terms of market capitalisation. Earlier in her budget speech Finance Minister Sitharaman had announced that the government will sell a part of its holding in LIC through an initial public offering.

The government has proposed to engage two transaction advisors prior to the IPO, for assisting the Department of Investment and Public Asset Management (DIPAM) in preparing For the IPO which according to experts might as well turn out to be the largest ever in the country. The advisors can submit their bids beginning Friday, till July 13, 2020. The bids would be opened by DIPAM on July 14. “Bidders 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 to March 31, 2020 or should have managed a capital market transaction of Rs 15,000 crore or more during the period,” the request for proposal said.

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The valuation of LIC is estimated by analysts to be somewhere between the range of Rs 9.9 lakh crore to Rs 11.5 lakh crore. The valuation has concluded on the basis of market capitalisation as a percentage of the asset under management. LIC’s AUM stood at Rs 33.2 lakh crore as of December 2019. SBI Life and HDFC Life, two other insurance firms have an AUM of Rs 1.64 lakh crore and Rs 1.36 lakh crore. The government is looking at listing the country’s largest life insurer on domestic bourses in the January-March quarter of current fiscal. With the divestment of stake in LIC, the government will be able to pocket a significant amount. So far the government’s divestment plans for this fiscal have not shaped up owing to the disruptions caused by the coronavirus pandemic.

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