The government is considering allowing foreign direct investment (FDI) in Life Insurance Corporation of India (LIC) ahead of the mega initial public offering (IPO). The move will enable overseas investors to buy stakes in the government-owned insurance company.
At present, FDI of up to 74 per cent is permitted in insurance companies. However, LIC and other public sector insurance companies come under their own statutes.
The foreign investors are required to seek permission from the Insurance Regulatory and Development Authority of India (IRDAI) in case they want to by a stake greater than 5 per cent in an insurance company.
As many as 16 merchant bankers are in the race to manage the IPO of LIC — touted to be the biggest share sale in the country’s history. These bankers will be making a presentation before the Department of Investment and Public Asset Management (DIPAM) spread over 2 days — August 24 and 25.
Seven international bankers, including BNP Paribas, Citigroup Global Markets India and DSP Merrill Lynch Ltd (now known as BofA Securities), have made presentations. Other bankers that also make presentations are — Goldman Sachs (India) Securities, HSBC Securities and Capital Markets (India), JP Morgan India, Nomura Financial Advisory and Securities (India).
Earlier on Wednesday, nine domestic bankers made a presentation before the officials of DIPAM, which is managing the government’s share sale in LIC. These bankers will include Axis Capital Ltd, DAM Capital Advisors Ltd, HDFC Bank Ltd, ICICI Securities Ltd and IIFL Securities Ltd. Other bankers that made a presentation on Wednesday are JM Financial Ltd, Kotak Mahindra Capital Co Ltd, SBI Capital Market Ltd, and Yes Securities India Ltd.
DIPAM had on July 15 invited application for appointment of merchant bankers for LIC IPO, looking to appoint up to 10 Book Running Lead Managers to handle the initial offering as a team. The last date for bidding was August 5.
The Cabinet Committee on Economic Affairs had last month cleared the initial public offering proposal of Life Insurance Corp of India. The ministerial panel known as the Alternative Mechanism on Strategic Disinvestment will now decide on the quantum of stake to be divested by the government. “The potential size of the IPO is expected to be far larger than any precedent in Indian markets,” the department had said.
The government had earlier appointed actuarial firm Milliman Advisors LLP India to assess the embedded value of LIC ahead of the initial public offering. Deloitte and SBI Caps have been appointed as pre-IPO transaction advisors.
The listing of LIC will be crucial for the government in meeting its disinvestment target of Rs 1.75 lakh crore for 2021-22 (April-March). So far this fiscal, Rs 8,368 crore has been mopped up through minority stake sales in PSU and the sale of SUUTI stake in Axis Bank.