LIC IPO to hit market in Q4, says DIPAM secy

So far this financial year, Rs 9,330 crore has been mopped up through minority stake sales in PSU and the sale of SUUTI (Specified Undertaking of the Unit Trust of India) stake in Axis Bank.

As potential bidders and other stakeholders have doubts if the government will be able to conclude the initial public offering of Life Insurance Corporation (LIC) and the sale of oil marketer-cum-retailer BPCL in the current fiscal year, given the allegedly slow pace of the relevant processes, a top government official on Wednesday kept their hopes alive.

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The government will invite financial bids for privatising as many as many as six CPSEs, including BPCL, BEML and Shipping Corp, by January, Tuhin Kanta Pandey, secretary in the department of investment and public asset management (DIPAM) said on Tuesday.

Speaking at the CII Global Economic Policy Summit 2021, the secretary also said the mega LIC IPO was expected in the January-March quarter of this fiscal. “On LIC IPO, we are working very hard. For the capital market, it will be a very big event in the first quarter of 2022,” Pandey said.

BPCL privatisation and LIC IPO are critical for the government to meet its high disinvestment target of `1.75 lakh crore for FY22.

The bidders for state-run oil marketer-cum-retailer are understood to be anxious about what they perceive as a lack of definite timelines for the company’s privatisation process, as they think any delay could impair their ability to arrange funds. Seeking anonymity due to the discreet nature of the deliberations, a person familiar with the matter told FE recently that, “big-ticket investors are waiting for clarity on the timelines of the auction process before making their final investment commitments”.

Any delay in invitation of the financial bids could also derail the government’s disinvestment target for FY22, as such “large deals involving big investments can take 4-5 months for completion,” the source pointed out.

It is not certain if the sale could be concluded in FY22, if the financial bids are to be invited only in January. In November 2020, multiple bidders including Vedanta, Apollo Global Management and Think Gas (I Sqared Capital) — showed interest in government’s 53% stake in BPCL. However, US private equity firm I Squared Capital is reported to have dropped out of the race to buy state-run oil firm, due to complex deal structure and lack of financial backers for the transaction.

The market value of the Centre’s entire stake in BPCL is worth a little over Rs 49,600 crore at the current prices. The government would likely want a premium over the current market valuation for its stake in BPCL.

To pave the way for privatisation, BPCL sold its entire 61.5% in Numaligarh Refinery to a consortium led by Oil India. It has also acquired 36.62% stake in Bharat Oman Refineries (BORL) — the unit that runs the 7.8 million tonne Bina refinery — from OQ SAOC (formerly known as Oman Oil Company), turning BORL into a wholly owned subsidiary of BPCL.

The LIC IPO could include offloading of up to 10% government stake and some fresh equity issuance by the insurer for business expansion plans. While the valuation of the insurer will be known closer to the listing, it is believed to be worth Rs 8-11.5 lakh crore, meaning a 10% stake sale could fetch the government around Rs 80,000-1,00,000 crore.

“The size of the IPO will be decided after the valuation exercise is completed. Accounting transition is also going on (restating books of accounts in compliance with the Companies Act). The DRHP will be filed after books of accounts till September are ready…by December-January,” Pandey had said earlier.

On Air India, Pandey said on Wednesday the government aimed to complete the handover of the national carrier by December.

So far this financial year, Rs 9,330 crore has been mopped up through minority stake sales in PSU and the sale of SUUTI (Specified Undertaking of the Unit Trust of India) stake in Axis Bank.

Last month, the government had accepted an offer by Talace, a unit of the holding company of the salt-to-software conglomerate Tata group, to pay Rs 2,700 crore cash and take over Rs 15,300 crore of the airline’s debt.

The secretary said that post the experience of Air India sale, going forward the privatisation of CPSEs can be accomplished faster. Cooperation from the private sector is also required. They too have a role to play so that they bid for the CPSEs which are on sale, he said. “We are moving towards a situation in privatization, where it is not only in policy but also in action,” said Pandey.
(with PTI inputs)