LIC IPO: Government Invites Bids Yet Again From Law Firms

On 2 September 2021, the Government of India was looking for bids from legal advisors for the second time regarding LIC IPO, which is believed to be the largest ever public offering in India. This decision was passed in light of the low interest during its first attempt.

So, what’s cooking here, and how will this IPO benefit policyholders?

Let’s dive in to find out!

Bids Invited For the Second Time for Legal Advisors

Due to insufficient interest in the first attempt, the DIPAM said that 16 September would be the last date for bids.

The Government has also selected 10 best Indian and global merchant banks to manage India’s largest IPO. These banks will advise DIPAM and develop a syndicate relating to the floor price and timing of this IPO.

These merchant bankers will also prepare the DRHP, structure the IPO, conduct pre-market roadshows and surveys, and conduct due diligence.

Moreover, besides the merchant bankers, Indian Government has also asked bids for the appointment of an advertising agency, a legal advisor, and a share transfer agent and registrar for LIC IPO.

As per SEBI, it allows foreign portfolio investors to buy shares in a public offer. Hence, the Government is also considering foreign investors to build up stakes in LIC.

Earlier in February, SEBI twisted its rules allowing promoters of companies with a market cap of Rs. 1 lakh crores post-IPO to cover 10% public shareholding in these coming two years to raise that figure by 25% in 5 years.

How Will the LIC IPO Benefit Policyholders?

The Government earlier mentioned that it has reserved up to 10% of this issue size for policyholders. Further, SEBI states that reservation aggregates and firm allotment shall not exceed the proposed issue amount by 10%. It also states that an issuer company can offer these shares to its employees at a discount of 10% on the floor price.

There are also reports that the Government can offer an issue price discount to LIC policyholders. As of now, the insurer pays a 5% surplus to the Government and remaining to policyholders. This figure will possibly change as the company will now become accountable to its shareholders for payment of dividends. However, sovereign guarantee policies by the Government will continue after this IPO.

Bottom Line

The Government announced a determined target of divestment worth Rs. 1.75 lakh crores in the FY2022 budget speech. Most of this said amount is expected to be covered by the LIC IPO. However, since the company’s public offering saw a lack of interest, let us hope that this move by the Government will ease such difficulties.

Frequently Asked Questions

1. Which banks will manage the LIC IPO?

Banks such as Goldman Sachs, JP Morgan, Nomura, BofA Securities, SBI Caps, Kotak Mahindra Capital, JM Financial, Axis Capital and ICICI Securities will manage this IPO.

2. When is the Government aiming to come out with this IPO?

The Government is planning to come out with an IPO on bourses between January and March 2022.

3. What is LIC IPO issue size?

Tentative issue size is between Rs. 80,000 crores and Rs. 1,00,000 crores.