The governmet is poised to hire Deloitte Touche Tohmatsu India and SBI Capital Markets Ltd(in place of Edelweiss Financial Services) to help Life Insurance Corp. of India prepare for an initial share sale, people with knowledge of the matter said.
The advisers will help evaluate the capital structure of India’s biggest insurer as well as aid the company in reworking its financial statement, according to a tender document issued in June.
The government will soon invite bids seeking firms to value LIC, the people said asking not to be identified citing rules on speaking to the media.
Prime Minister Narendra Modi’s government is keen to go ahead with the initial public offering — potentially India’s biggest — to help plug a widening budget gap. The coronavirus pandemic has prompted the administration to boost market borrowing as revenue slumped following a nationwide lockdown.
A spokesperson for the Ministry of Finance couldn’t immediately be reached outside business hours.
Earlier, after evaluating bids from almost a dozen of players,the government has finalised Edelweiss Financial Services Ltd and Deloitte as the two pre-initial public offer (IPO) transaction advisors for the mega IPO of the life insurance behemoth Life Insurance Corporation of India (LIC),
However Edelweiss Financial Services had opted out of the process of pre-initial public offering advisor selection on concerns related to conflict of interest.
Edelweiss has written to the government and voluntarily opted out of the process following concerns raised by the government on a potential conflict of interest scenario due to the firm's existing life insurance joint venture with Tokio Marine.
LIC’s IPO is expected to be the largest in the domestic capital markets and time line for the IPO is not yet known though Finance Minister Nirmala Sitharaman in her 2020-21 budget speech had announced that the proposed IPO which would contribute majorly in this financial year’s ambitious Rs 2.1-trillion disinvestment target
Currently, the government is the sole owner of the LIC which is by the LIC Act,1956 which needs to be amended before starting the process.
The LIC Act, in its present form, disallows listing of the corporation The IPO of LIC would contribute a huge chunk to the government's budgeted disinvestment kitty of Rs 2.10 lakh crore this fiscal.
For the 2020-21 fiscal, the government has set a disinvestment target of Rs 2.10 lakh crore. Of this, Rs 1.20 lakh crore will come from disinvestment of public sector undertakings and another Rs 90,000 crore from stake sale in financial institutions including LIC and IDBI.