The Indian Government is all set to hire Deloitte Touche Tohmatsu India Ltd. and SBI Capital Markets Ltd. to provide support to Life Insurance Corporation of India to prepare for an initial share sale. According to a tender document issued in June, the financial experts will help to evaluate the capital structure of India’s biggest insurer as well as aid the company is reworking its financial statement. 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.
The government is eager to go ahead with the initial public offering mainly India’s largest source to help plug an improving budget gap. The present situation of coronavirus pandemic has caused the administration to uplift market borrowing as revenue fall following a nationwide lockdown. The Ministry of Finance couldn’t immediately extend 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). Anyhow, Edelweiss Financial Services had picked 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 pick 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 the timeline 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 2020-21 fiscal, the government has set a disinvestment target of Rs 2.10 lakh crore. Apart from 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.
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