Indian Legislation Companies Reluctant To Advise On IPO Of Insurance coverage Large LIC: Report
India’s plans to record state-run Life Insurance coverage Company (LIC) face an uncommon downside: home regulation companies 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 tens of millions of policyholders and a share of 66% of recent premium collections in a crowded insurance coverage market, LIC is a family title, managing property of greater than $450 billion.
The federal government 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 international and home funding banks just lately bid to deal with it.
However prime regulation companies that may 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 regulation agency companions instructed Reuters.
“Most big law firms in India are overburdened with IPO work,” mentioned Nitin Potdar, an M&A associate at prime Indian regulation agency J. Sagar Associates. “And the LIC IPO would need real big teams of experienced lawyers.”
LIC’s large dimension and sophisticated enterprise construction and merchandise make it a “nightmare” for legal professionals to draft the prospectus, he added.
The unappealing charges are one other dampener, mentioned regulation 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 regulation companies to submit bids.
Refinitiv knowledge exhibits India has about $6 billion price of IPOs within the pipeline.
After food-delivery large Zomato’s $1.2 billion IPO in July, digital funds agency Paytm and ride-hailing large Ola are eyeing market debuts, holding legal professionals busy and their money registers ringing.
In an embarrassing episode, the federal government has twice revised its supply to draw regulation companies for the LIC IPO.
In early September, after an preliminary lacklustre response, New Delhi restricted the timeline of the companies’ IPO work to a few years.
Main companies, equivalent to Cyril Amarchand Mangaldas, Shardul Amarchand Mangaldas and Khaitan & Co, would usually be eager on a authorities IPO of this dimension, however didn’t bid within the first tender, sources conscious of the matter mentioned.
The three companies didn’t reply to queries from Reuters.
Authorities officers additionally just lately referred to as a number of prime regulation companies and nudged them to hitch in IPO work, mentioned three regulation agency companions aware of the discussions.
This week, the federal government eased its price cost timetables, to supply 50% cost after the draft IPO prospectus is filed.
However the IPO work on LIC is expansive and sophisticated, the regulation agency companions mentioned, which makes them even much less eager.
Legislation companies 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,” mentioned one prime associate in an Indian regulation agency.
(Apart from the headline, this story has not been edited by NDTV employees and is revealed from a syndicated feed.)