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The listing of LIC is set to be India's biggest
ever initial public offering (IPO), with the government aiming
to raise up to 900 billion rupees ($12.2 billion) from its stake
sale.
At present, even though foreign institutional investors are
allowed to hold up to 74% of private insurance companies and up
to 20% of state-owned banks, they are not permitted to own
shares in LIC.
Enabling this would allow foreign pension funds, insurance
companies and mutual funds to participate in the IPO of India's
largest life insurer.
The government is keen to complete the listing this financial
year to help with budgetary constraints and late last month
selected 10 merchant banks out of the sixteen that had bid to
kick-start the process.
In total, the merchant banks will earn a fee of around 100
million rupees ($1.36 million), higher than the token fee
charged on some IPOs of state-owned firms in the past, but still
significantly lower than fees for private listings.
For instance, food delivery startup Zomato paid $31 million in
fees for listing earlier this year, according to Dealogic.
The low fee, however, has not been a deterrent, with nearly all
the major banks barring Morgan Stanley queuing up.
"We can’t care less about what is the money that is being
offered. It is the biggest IPO in recent times and will be
probably the biggest, say for another 5 years," said a merchant
banker.
(Reporting by Aftab Ahmed in New Delhi and Nupur Anand in
Mumbai; Additional reporting by Scott Murdoch in Hong Kong;
Editing by Sanjeev Miglani and Mark Potter)
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