Kick-starting the process of LIC disinvestment, the Finance Ministry on Friday invited bids from consulting firms, investment bankers, and financial institutions for advising it on the proposed mega initial public offer (IPO).
The government currently owns 100 per cent in LIC.The IPO which was announced by finance minister Nirmala Sitharaman while presenting the Budget 2020, is likely to hit the market in the second half of the current fiscal.
Sitharaman said government wants to raise around Rs 90,000 crore from its disinvestment plans in IDBI, where it holds 46 per cent and LIC, where it has 100 per cent stake and may offload 10-12 per cent of its holding.
Analysts observe that the governmemt may raise over Rs 60,000 crore through LIC IPO.
The IPO of LIC would contribute a huge chunk to the government's budgeted disinvestment kitty of Rs 2.10 lakh crore this fiscal.
The government proposes to engage up to two pre-IPO transaction advisors, for assisting the Department of Investment and Public Asset Management (DIPAM) in the preparatory processes leading to the Initial Public Offer (IPO) of Life Insurance Corporation of India (LICI), tipped to be the largest ever in the country.
The government "proposes to engage up to two pre-IPO Transaction Advisor(s) from reputed professional consulting firms/ investment bankers/ merchant bankers/ financial institutions/ banks, independently (not in the consortium) for facilitating/assisting DIPAM in the preparatory processes leading to the IPO of LICI, the Finance Ministry said in the Request For Proposal (RFP) for engaging pre-IPO transaction advisors.
The advisors can submit their bids beginning Friday, till July 13, 2020. The bids would be opened by DIPAM on July 14.
The advisor would ensure preparatory aspects of the proposed IPO and would, advise and assist the government on modalities of IPO and the timing; structuring the transaction; organizing non-deal roadshows, suggesting measures to fetch optimum value; positioning of the minority sale, among others, the RFP said.
The bidder would be required to have at least 3 years experience for providing advisory services for IPO/strategic disinvestment/strategic sale/M&A activities/ private equity investment transaction.
"Bidders should have advised, handled, and completed at least one transaction of IPO of a size of Rs 5,000 crore or more between April 1 2017 to March 31, 2020 or should have managed a capital market transaction of Rs 15,000 crore or more during the period, the RFP said.
In the 2020-21 Budget, Finance Minister Nirmala Sitharaman had announced government's plan to sell a part of its holding in LIC by way of Initial Public Offer (IPO).
"Listing of companies on stock exchanges disciplines the company and provides access to financial markets and unlocks its value. It also gives an opportunity for retail investors to participate in the wealth so created," she had said.
Earlier, Minister of State for Finance Anurag Thakur had said the government will protect the interest of policyholders of LIC, which is likely to go public in the next financial year, .
Listing of LIC will help bring in greater transparency, public participation and also deepen the equity market, he said.
"Government came out with the idea (LIC listing). The details will follow and it will be in the interest of LIC and its policyholders. Interest of LIC and policyholders will be safeguarded," he had said
Asked about quantum of stake sale, he said, once the amendment to the LIC Act is finalised you will get all the details.