Domestic banks that have bid to manage the IPO include Kotak Mahindra Capital, Axis Capital, ICICI Securities, JM Financial, DAM Capital, Edelweiss, HDFC Bank, Yes Securities, SBI Capital and IIFL, while foreign investment banks in the running include Citi, Bank of America, HSBC, Goldman Sachs, JPMorgan, BNP Paribas, Nomura and CLSA, the people cited above said on condition of anonymity.
“Now, there will be pitches by all the banks that have bid for the mandate, and the final list of banks that get selected for the deal will be finalized by the end of this week or early next week,” one of the three people said.
“The disinvestment department hasn’t given a firm indication of the size, but the IPO will be a mix of stake sale by the government and fresh fundraising for LIC, and on the timeline, they have said that the IPO will happen in this financial year,” the person added.
Up to 10 banks will be selected for the IPO, the department of investment and public asset management (Dipam) had said while inviting bids.
The banks will be scored on various parameters such as past experience of handling IPOs of over ₹5,000 crore in size, expertise in life insurance, qualification of team members, marketing strategy, strength in drawing retail participation and global distribution capabilities. Banks also have to indicate the valuation approaches to be followed in determining the IPO price, along with an estimated value. A mere 10% stake in LIC is estimated to be worth at least ₹1 trillion, which will make it one of the most valuable companies in India, Mint reported earlier.
Unlike in the past when banks would quote as low as ₹1 to bag marquee government divestment deals, in the case of the LIC IPO, a minimum fee of ₹1 crore has been fixed for each bank in the final syndicate.
No separate fee is proposed to be paid to the book running lead managers.
To elicit wider retail investor participation, the government has decided to bear the expenses relating to the payment of brokerage to brokers. The brokerage will be 0.35% on allotment to retail investors, 0.15% on allotment to non-institutional investors and 0.25% on allotment to eligible staff or policyholders out of quota reserved for them. Processing fees for UPI and ASBA (application supported by blocked account) will also be borne by LIC or the government, given the expectation of large retail participation.
Mint reported in June that in the run-up to the LIC IPO, the government plans to bring in a clutch of anchor investors to invest up to ₹25,000 crore in LIC’s shares. The country’s largest insurer will also undergo a change in its board structure and adopt new accounting norms before the IPO. ICICI Securities, DAM Capital, BNP Paribas and HSBC declined to comment, while emails sent to others remained unanswered.
This article was first published on livemint.com.