India’s plans to record state-run Life Insurance Corporation (LIC) face an uncommon downside: home legislation corporations are shying away from advising the federal government, deterred by the low charges on supply on the time of a profitable growth in company inventory listings.
With thousands and thousands of policyholders and a share of 66% of latest premium collections in a crowded insurance coverage market, LIC is a family identify, managing belongings of greater than $450 billion.
The authorities is scrambling to record the insurance coverage behemoth by March, in an train set to be India’s greatest IPO, at a possible $12 billion. As many as 16 world and home funding banks not too long ago bid to deal with it.
But high legislation corporations that will usually be eager on such big-ticket IPOs to spice up their credibility in authorities circles are hesitant to advise New Delhi, as their groups are stretched by the company IPO growth, 5 legislation agency companions instructed Reuters.
“Most big law firms in India are overburdened with IPO work,” stated Nitin Potdar, an M&A associate at high Indian legislation agency J. Sagar Associates. “And the LIC IPO would need real big teams of experienced lawyers.”
LIC’s huge measurement and complicated enterprise construction and merchandise make it a “nightmare” for legal professionals to draft the prospectus, he added.
The unappealing charges are one other dampener, stated legislation agency companions, who spoke on situation of anonymity to keep away from authorities reprisals.
The finance ministry, which is dealing with the IPO course of, didn’t instantly reply to requests for remark.
Thursday is the deadline for the legislation corporations to submit bids.
Refinitiv knowledge reveals India has about $6 billion price of IPOs within the pipeline.
After food-delivery big Zomato’s $1.2 billion IPO in July, digital funds agency Paytm and ride-hailing big Ola are eyeing market debuts, protecting legal professionals busy and their money registers ringing.
In an embarrassing episode, the federal government has twice revised its supply to draw legislation corporations for the LIC IPO.
In early September, after an preliminary lacklustre response, New Delhi restricted the timeline of the corporations’ IPO work to 3 years.
Leading corporations, comparable to Cyril Amarchand Mangaldas, Shardul Amarchand Mangaldas and Khaitan & Co, would usually be eager on a authorities IPO of this measurement, however didn’t bid within the first tender, sources conscious of the matter stated.
The three corporations didn’t reply to queries from Reuters.
Government officers additionally not too long ago referred to as a number of high legislation corporations and nudged them to hitch in IPO work, stated three legislation agency companions conversant in the discussions.
This week, the federal government eased its payment cost timetables, to supply 50% cost after the draft IPO prospectus is filed.
But the IPO work on LIC is expansive and complicated, the legislation agency companions stated, which makes them even much less eager.
Law corporations should deal with 36 duties on the federal government’s to-do record for LIC, from drafting the IPO papers, and fielding regulators’ queries to reviewing company governance and pending litigation, and analysing dangers.
The quantity of labor wanted could be as a lot as for 5 non-public IPO offers, and nonetheless “it won’t be remunerative,” stated one high associate in an Indian legislation agency.
(Except for the headline, this story has not been edited by NDTV workers and is revealed from a syndicated feed.)