The Indian government has finalized 10 merchant bankers to manage the mega initial public offering of Life Insurance Corporation. It is also considering allowing foreign investors to pick up stakes in the country’s largest insurer.
The selected merchant bankers are Goldman Sachs (India) Securities, Citigroup Global Markets India, Nomura Financial Advisory and Securities India, SBI Capital Market, JM Financial, Axis Capital, BofA Securities, JP Morgan India, ICICI Securities and Kotak Mahindra Capital.
The government invited applications for the appointment of merchant bankers on July 15 and 16 bankers made presentations for managing listing and partial disinvestment.
The government may also allow foreign institutional investment of up to 20% in Life Insurance Corporation. According to Securities and Exchange Board of India rules, foreign portfolio investors are permitted to buy shares in a public offer.
But the LIC Act has no provision for foreign investments. There is a need to align the proposed LIC IPO with Sebi norms regarding foreign investor participation.
The government is also in the process of appointing a legal adviser for the stake sale and the last date for putting in bids is September 16. The listing is set to be India’s biggest public offer ever, with the government aiming to raise up to 900 billion rupees (US$12.24 billion) from its stake sale.
According to Jefferies India, the sale is set to be the country’s biggest and could value the insurer at about $261 billion, surpassing Reliance Industries Ltd. Market observers feel that given the size of the offering, the government may divest it in two parts to investors.
The insurer has played a major role in funding capital-intensive infrastructure projects such as roads, railways and power for more than six decades. It has also helped the government bail out private and state-owned financial institutions such as UTI, GTB and Yes Bank, and boosted stock markets whenever there was a bear run.
The stake sale plan has evoked anxiety among its 114,000 employees. Trade unions fear it could result in job losses and impact the insurer’s social infrastructure spending plans. One of the trade unions, All India LIC Employees’ Federation, has written to the prime minister and members of Parliament to oppose the public listing and is planning campaigns to raise concerns about the share sale.
The listing of Life Insurance Corporation will be crucial for the government in meeting its disinvestment target of 1.75 trillion rupees ($23.70 billion) for 2021-22 (April-March).
So far this financial year, 83.68 billion rupees has been mopped up through minority stake sales in state-owned enterprises and the sale of Specified Undertaking of the Unit Trust of India stake in Axis Bank.
The government’s other disinvestment plans include stake sales in other state-owned enterprises such as Bharat Petroleum Corporation, Air India and Shipping Corporation of India.