IPO-bound LIC ropes in six directors

Ahead of the initial public offering (IPO), Life Insurance Corporation (LIC) last month appointed six independent directors on its board to meet regulatory norms of corporate governance.

LIC appointed former financial services secretary Anjuly Chib Duggal, ex-Sebi member G Mahalingam, former SBI Life managing director Sanjeev Nautiyal, sources said. Besides, chartered accountant MP Vijay Kumar, Raj Kamal, and V S Parthasarathy are roped in as independent directors on LIC’s board. With the appointment, the total number of independent directors goes up to nine and all vacancies are filled. Fulfilling corporate governance norms is an important element for filing Draft Red Herring Prospectus (DRHP) with the Securities Exchange Board of India (Sebi).

The central government is expected to file draft papers for the mega initial public offering of LIC with market regulator Sebi by this week, Department of Investment and Public Asset Management (DIPAM) Secretary Tuhin Kanta Pandey had said. The embedded value of LIC has been arrived at and it is over Rs 5 lakh crore. The size of the issue would be mentioned in the DRHP. The issue, after approval of Sebi, is likely to hit the market in March, Pandey said.

LIC’s listing is crucial for the government to meet the lowered revenue estimates of Rs 78,000 crore for the current financial year. Till now, the Centre has raised around Rs 12,000 crore from privatisation of Air India and stake sale in other PSUs.

Chairman term extended

To facilitate smooth listing of the insurance behemoth, the government last week extended the tenure of LIC chairman M R Kumar for one year. Besides, the government has also extended the tenure of one of the managing directors, Raj Kumar, for 12 months. This is the second extension for the LIC chairman. Last year in June, he was given a nine-month extension in view of LIC’s proposed initial public offering towards the end of the current financial year.

Transaction advisors

Actuarial firm Milliman Advisors LLP India has worked out the embedded value of LIC, while Deloitte and SBI Caps have been appointed as pre-IPO transaction advisors. Under the embedded value method, insurance companies’ present value of future profit is also included in their present net asset value (NAV).

The government has appointed 10 merchant bankers, including Goldman Sachs (India) Securities Pvt Ltd, Citigroup Global Markets India Pvt Ltd and Nomura Financial Advisory and Securities (India) Pvt Ltd, to manage the mega IPO of the country’s largest insurer.

FDI policy tweak

Separately, the Department for Promotion of Industry and Internal Trade (DPIIT) is making changes in the FDI policy to facilitate disinvestment of LIC, after taking views from the finance ministry.

DPIIT Secretary Anurag Jain said an inter-ministerial consultation on the matter is at its last stage. “Hopefully, it should happen very soon... All the comments that will come (from different departments) will be supportive (of the proposal),” he told reporters.

He also expressed hope that the Cabinet will soon take up this proposal. As per Sebi rules, foreign portfolio investors (FPI) are permitted to buy shares in a public offer. FDI policy would have to be tweaked for FII/FPI investment in this IPO, as LIC is a corporation and not an insurance company. The Cabinet Committee on Economic Affairs had in July last year cleared the proposal for LIC’s IPO.