LIC IPO: Finance Secretary TV Somnathan, while addressing Madras School of Economics’ said that the stake sale of government participation in LIC will be done between March-June 2022

After back to back IPOs on Dalal Street, the next one of the most sought after mega IPO of LIC is attracting all the attention. Clearing the fog around the timeline on LIC IPO, finance secretary TV Somnathan, while addressing Madras School of Economics’ said that the stake sale of government participation in LIC will be done between March-June 2022. This means that the listing of LIC will be completed by June 2022. He said this in an address to the Madras School of Economics.’ This is for the first time that the clarity on the timeline of LIC IPO was given. Earlier, Chief Economic Advisor, KV Subramanian said that LIC IPO will complete in the fourth quarter of 2021.

“…this year’s budget has ₹1.75 lakh crores as the proceeds from privatisation. Air India is proceeding well. You must have read that there are two bids that have come. Bharat Petroleum and LIC’s listing is also, we are confident it should happen by the fourth quarter of this year,” Subramanian said.

Taking a step forward, the government on Sunday shortlisted Cyril Amarchand Mangaldas as a legal advisor on upcoming mega IPO of LIC. Four law firms — Crawford Bayley, Cyril Amarchand Mangaldas, Link Legal and Shardul Amarchand Mangaldas & Co — had made presentations before the Department of Investment and Public Asset Management on September 24.

Apart from the legal advisor, the government has appointed 10 top global and Indian merchant banks to manage the initial public offer of Life Insurance Corporation (LIC) of India. It has also selected Concept Communications as the advertising agency and Kfintech as the registrar and share transfer agent for the IPO. The Department of Investment and Public Asset Management said in a that it has appointed Goldman Sachs, JP Morgan, Citigroup, Nomura, Bank of America Securities, JM Financial, SBI Caps, Kotak Mahindra Capital, ICICI Securities and Axis Capital to manage the IPO.

“Government has finalised the book running lead managers and some other advisors for the IPO of LIC,” DIPAM Secretary Tuhin Kanta Pandey tweeted few days back.

According to media reports, the government will reserve 10 per cent of the issue size would be reserved for the policyholder. There could be a discount on the floor price too. At present, LIC policyholders have bought 289 million policies.

In the Union budget of 2020-2021, Finance Minister Nirmala Sitharaman first mooted the idea of LIC’s IPO. The government intends to divest its stake in the state backed Life Insurance corporation almost by 10 per cent. The government is seeking a valuation of between Rs 8 trillion (USD 109 billion) and Rs 10 trillion for the LIC. With this valuation, this can be dubbed as the nation’s biggest initial public offering. In the budget of 2021-2022, the government set the divestment target of Rs 1.75 lakh crore and thus to realize the target the government is actively pushing for the divestment of LIC. According to experts, LIC is key to achieve the divestment target.

Amid the buzz of the IPO, when all are looking up to it, its own trade union is against the IPO. According to one of its largest trade union, the mega IPO of LIC could result in job losses and impact the company’s social infrastructure spending plans. Rajesh Kumar, general secretary of All India LIC Employee Federation said in an interview that the LIC was formed to provide insurance to rural and social and economically backward people.” The company, which has been funding capital-intensive infrastructure projects such as roads, railways and power for more than six decades, may instead focus on “profit-maximizing investments” after the IPO,” Kumar said.

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