Indian law firms want higher fees to advise on LIC’s mega IPO

Government officials also recently called a few prominent law firms and urged them to join the IPO work, said three law firm partners familiar with the talks. This week, the government relaxed its fee payment schedules, to offer a 50% payment after the draft IPO prospectus was filed.

 

New Delhi, Sept 15:

India’s plan to list the state-run life insurance company (LIC) runs into an unusual problem: domestic law firms are reluctant to advise the government, deterred by the low fees offered to the government. moment of a lucrative stock market boom.

With millions of policyholders and a 66% share of new premium collections in a crowded insurance market, LIC is a household name, managing over $ 450 billion in assets.

The government is working to list the insurance giant by March, in what is expected to be India’s largest IPO, at a likely $ 12 billion. Up to 16 national and global investment banks have recently bid to manage it.

But the best law firms that would normally be interested in such expensive IPOs to bolster their credibility in government circles are reluctant to advise New Delhi as their teams are strained by the boom in corporate IPOs. five law firm partners told Reuters.

“Most of the big law firms in India are overloaded with IPO work,” said Nitin Potdar, mergers and acquisitions partner at large Indian law firm J. Sagar Associates. “And the IPO of LIC would need real large teams of experienced lawyers.”

LIC’s massive size and complex business structure and products make it a “nightmare” for lawyers to draft the prospectus, he added.

The unattractive fees are another drag, said partners at the law firm, who requested anonymity to avoid retaliation from the government.

The finance ministry, which manages the IPO process, did not immediately respond to requests for comment.

Thursday is the deadline for law firms to submit bids.

Refinitiv data shows India has around $ 6 billion in IPOs pending.

After the $ 1.2 billion IPO of food delivery giant Zomato in July, digital payment firm Paytm and transit giant Ola are considering debuts in the market, occupying lawyers and making ring their cash registers.

In an embarrassing episode, the government twice revised its bid to attract law firms for the LIC’s IPO.In early September, after a lackluster initial response, New Delhi limited the timetable for the companies’ IPO work to three years.

Leading firms, such as Cyril Amarchand Mangaldas, Shardul Amarchand Mangaldas and Khaitan & Co, would generally like a government IPO of this size, but did not bid in the first tender, sources told the current of the file.

The three companies did not respond to questions from Reuters.

Government officials also recently called a few prominent law firms and urged them to join the IPO work, said three law firm partners familiar with the talks.

This week, the government relaxed its fee payment schedules, to offer a 50% payment after the draft IPO prospectus was filed.

But the IPO work on LIC is large and complex, the law firm’s partners said, making them even less enthusiastic.

Law firms must tackle 36 tasks on the government’s task list for LIC, from drafting IPO documents and requests from regulators to reviewing corporate governance and pending litigation, and risk analysis.

The amount of work required would equate to five private IPOs, and still “it won’t pay off,” said one of the senior partners of an Indian law firm.


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