India’s plan to list state-run Life Insurance Corporation (LIC) is facing an unusual problem, with domestic law firms shying away from advising the government because of the low charges on offer at a time of a lucrative boom in corporate stock listings.
With millions of policy holders and a share of 66% of new premium collections in a crowded insurance market, LIC is a household name, managing assets of over $450 billion.
The government is making efforts by March to list the insurance giant, in what is likely to be India’s biggest IPO, for a potential $12 billion. 16 global and domestic investment banks had recently bid to take over.
But top law firms that are generally keen on such big-ticket IPOs to bolster their credibility in government circles are hesitant to advise New Delhi, as their team expands from the corporate IPO boom, Five law firm partners told Reuters.
Top Indian law firm J.J. Nitin Potdar, M&A partner at Sagar Associates, said, “Most of the big law firms in India are burdened with IPOwork.” “And LIC IPO will require real big teams of experienced lawyers.”
He said LIC’s sheer size and complex business structure and product make drafting prospectus a “nightmare” for lawyers.
Law firm Partners, who spoke on condition of anonymity to avoid government retaliation, said unattractive fees are another dampener.
The finance ministry, which is handling the IPO process, did not immediately respond to requests for comment.
The last date for submission of bids for law firms is September 16.
Refinitiv data shows that India has IPOs worth around $6 billion in the pipeline.
Following the $1.2 billion IPO of food-delivery giant Zomato in July, digital payments firm Paytm and ride-hailing giant Ola are eyeing market debuts, keeping lawyers busy and their cash registers ringing. Huh.
In a shameful episode, the government has twice revised its proposal to attract law firms for LIC IPO.
In early September, after an initial weak response, New Delhi limited the deadline for the firms’ IPO work to three years.
Sources familiar with the matter said major companies such as Cyril Amarchand Mangaldas, Shardul Amarchand Mangaldas and Khaitan & Co would generally be interested in government IPOs of this size, but did not bid in the first tender.
All three firms did not respond to questions from Reuters.
Three law firm partners familiar with the discussion said that government officials recently called some top law firms as well and prompted them to get involved in the IPO work.
This week, the government relaxed its fee payment timetable to offer 50% payouts after the draft IPO prospectus is filed.
But the IPO work on LIC is elaborate and complicated, the legal partners said, which makes them even less eager.
Law firms must tackle 36 tasks ranging from preparing IPO papers on government employees for LIC, to reviewing corporate governance and filing regulators’ queries to analyze pending litigation and risks.
A top partner at an Indian law firm said the amount of work would be equivalent to five private IPO deals, and even then “it would not be remunerative”.
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