LIC IPO: Government invites bids to appoint merchant bankers

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Life Insurance Corporation, India’s largest life insurer is gearing up to go public later this year. The Central government owns a 100% stake in LIC and has approved a disinvestment plan of the company which includes an initial public offering (IPO). In a bid to jumpstart the process of the mega IPO the government has invited bids from merchant bankers and legal advisors for advice regarding the listing process.

India prepares for the largest IPO ever

The finance ministry’s department of investment and public asset management (DIPAM) while inviting bids from merchant bankers said that the potential size of the LIC IPO is expected to be bigger than any other company that has been listed on the Indian exchanges so far. It also said that for achieving a successful IPO, the Government of India must attract investment from both domestic as well as global institutional investors apart from retail investors.

The DIPAM is also going to appoint around 10 merchant bankers along with a legal firm for assistance and advice regarding this entire sale of stake of LIC. Merchant bankers can put their bids forward till August 5, while law firms have time till August 6.

DIPAM said that the whole process of listing LIC’s shares on exchanges would involve a part-sale of the stake which the government has in it and an IPO to raise fresh equity share capital.

DIPAM also stated that merchant bankers registered under the Securities and Exchange Board of India (Sebi) can place their bids either as a single entity or as a consortium. They should have a valid certificate along with experience and expertise in public offerings that take place in the capital market.

The merchant bankers will be required to undertake a range of responsibilities. These include the preparation of the draft red herring prospectus (DHRP), advising the government on the timings and other modalities related to an IPO, and also organizing roadshows in both domestic and international markets.

In addition to merchant firms and legal entities, the DIPAM has also called for bids and proposals from the registrar and share transfer agents along with an advertising agency for the IPO.

LIC’s IPO was approved by the Union Cabinet last week, while other modalities such as issue size, pricing, and timing would be looked after by a panel which is to be headed by Union finance minister Nirmala Sitharaman.