Tag: LIC

7 firms in race for transaction advisor, BFSI News, ET BFSI

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As many as seven firms, including JM Financial, Ernst and Young and Deloitte, have bid for managing the strategic sale of IDBI Bank.

These firms would make a virtual presentation before the Department of Investment and Public Asset Management, which is handling the sale process, on August 10, according to a notice by DIPAM.

The firms that have bid for acting as transaction advisor are Deloitte Touche Tohmatsu India LLP, Ernst and Young LLP, ICICI Securities, JM Financial Ltd, KPMG, RBSA Capital Advisors LLP and SBI Capital Markets.

DIPAM would appoint one transaction advisor for the strategic sale of IDBI Bank, in which the central government and LIC together own more than 94 per cent.

LIC, currently having management control, has a 49.24 per cent stake, while the government holds 45.48 per cent in the bank. Non-promoter shareholding stands at 5.29 per cent.

The exact quantum of stake dilution would be decided later.

The government in June invited bids from reputed professional consulting firms / investment bankers / merchant bankers / financial institutions / banks, for facilitating/assisting DIPAM in the process of strategic disinvestment of IDBI Bank Ltd. along with transfer of management control, till completion of the transaction. The last date for bid submission was July 13, which was later extended till July 22.

The Transaction Advisor would be required to advise and assist the government on modalities of disinvestment and the timing; recommend the need for other intermediaries required for the process of sale/disinvestment and also help in identification and selection of the same with proper Terms of Reference; preparation of all documents like Preliminary Information Memorandum (PIM), organise roadshows, suggest measures to fetch optimum value.

The advisor would also be supporting IDBI Bank in setting up of the e-data room and assisting in the smooth conduct of the due diligence process, will help position the divestment of GoI equity in IDBI Bank to organize roadshows and to generate interest among the prospective buyers.

The Cabinet in May had approved the strategic sale of the entire stake of the government and Life Insurance Corporation (LIC) in IDBI Bank Ltd.

In response to queries received from potential transaction advisors in IDBI Bank, the DIPAM had last month clarified that since LIC’s stake would be sold along with that of the government’s, a single transaction advisor would manage the entire share sale process.

The quantum of stake dilution would be declared before RFP (Request for Proposal) stage of the transaction.

Finance Minister Nirmala Sitharaman in her Budget for 2021-22 had said the process of privatisation of IDBI Bank would be completed in the current fiscal. The government aims to mop up Rs 1.75 lakh crore in the current fiscal from minority stake sale and privatisation.

Of the Rs 1.75 lakh crore, Rs 1 lakh crore is to come from selling government stake in public sector banks and financial institutions while Rs 75,000 crore would come as CPSE disinvestment receipts.

So far in the current fiscal the government has mobilised Rs 7,648 crore as disinvestment receipts.



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Mini Ipe takes charge as LIC Managing Director

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Mini Ipe has taken charge as Managing Director of Life Insurance Corporation of India.

LIC divestment: It’s like killing the golden goose

She was named by the Centre on July 5 this year.

Ipe was previously Executive Director of LIC’s Legal Department.

A postgraduate in Commerce from Andhra University, Ipe had joined LIC in 1986 as a direct recruit officer.

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New IDBI owners may get RBI road map to cut stake, BFSI News, ET BFSI

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NEW DELHI: The Reserve Bank of India (RBI) is expected to provide a road map to the new owners of IDBI Bank for reducing their stake as the government seeks to sell its equity, along with shares held by Life Insurance Corporation (LIC) of India, by the end of the current fiscal year.

Although the RBI has not firmed up its views on new licensing norms for private banks, announcement of the new structure may help generate more interest in the lender, which the Centre has been seeking to reposition for two decades but with little success.

In the past, the RBI had indicated that the government’s stake sale and announcement of the new norms were not linked. Sources, however, said that the government has been in dialogue with the RBI on stake sale and the regulator was aware of the need to provide a road map for comfort to potential buyers.

The current guidelines stipulate 40% minimum shareholding in terms of the paid up capital or voting rights. Over 10 years, this needs to be diluted to 20-30% and further reduced to 15-26% between 12 and 15 years, depending on the licence vintage. An internal group set up by the RBI had proposed reworking these, apart from allowing corporate houses into the space.

Many of the bidders may seek clarity on these aspects. Recently, the department of investment and public asset management had said that the government and LIC would decide on the extent of stake sale during the process of finalising the deal.

Although private investors are keen that the government holds no stake, something that NITI Aayog too had noted in some of its recommendations, government sources said, the idea was to leave it to bidders to decide the best course of action. “Someone may want majority control, while someone may like to do with a lower stake. Let the bidders decide,” said a source.

The government currently holds 45.5% in the financial institution-turned-universal bank with LIC’s shareholding pegged at 49.2%. On Friday, the bank’s share rose 0.4% to close at Rs 37.9 on BSE but is still lower than LIC’s acquisition price. LIC had acquired shares in IDBI Bank in three tranches.



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How LIC’s Saral Pension Yojana stacks up

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To make insurance products easier to understand and choose from, the insurance regulator has been asking insurers to launch no-frills versions of their popular products. LIC launched its Saral Pension Yojana, a simplified version of immediate annuity plans earlier this month. How does it compare to alternatives in the market?

What it offers

Immediate annuity plans from insurers promise to pay you a lifelong pension in return for an upfront investment, which is called the ‘purchase price’. LIC’s Saral Pension Yojana guarantees pension at a fixed rate throughout your lifetime. This should be distinguished from the bonuses paid on LIC’s participating plans, which can vary based on its surpluses each year.

You can choose to receive your pension from this plan on a monthly, quarterly, half-yearly or annual basis. The pension starts in the immediate period after your purchase. If you opt for a monthly payout, you’ll receive your first pension one month after you make the initial investment.

Any investor between the ages of 40 and 80 can buy LIC’s Saral Pension Yojana. This is a slightly narrower range than allowed by LIC’s older immediate annuity plan Jeevan Akshay VII, which allows investments until the age of 100.

Saral Pension Yojana allows surrender after completing six months, at 95 per cent of the original investment, but only if the policyholder, spouse or children are diagnosed with specific critical illnesses.

While Jeevan Akshay offers the choice of 10 different options, Saral Pension Yojana limits its options to just two. You can opt for a single life plan, where you receive lifelong pension with your initial investment (purchase price) paid back to nominees after your death. Or you can choose a joint life plan, where after your passing your spouse or other dependant receives a lifelong pension. After the death of both annuitants, your nominees get your purchase price.

In offering just two options, the Saral Pension Yojana leaves out some useful features from Jeevan Akshay. In Jeevan Akshay VII, you can lock into joint pensions for a minimum guaranteed period of 5, 10, 15 or 20 years irrespective of whether you survive this period (your spouse/dependant will receive it in case of your death). Jeevan Akshay also offers a pension plan without any return of purchase price.

These additional options help you earn higher monthly income from the same purchase price. For instance, if you choose for option E of Jeevan Akshay with a 20-year pension guarantee, you can expect 19 per cent higher pension than with the joint annuity. Option A – annuity for life without any return of purchase price – helps you earn 20 per cent higher pension than that with return of purchase price. This can be useful for folks who aren’t keen to leave a legacy.

Returns

Your returns from LIC Saral Pension Yojana depend mainly on your age of entry and the option you choose. LIC offers rebates based on the size of your upfront investment.

Returns on annuity plans get better with a higher age of entry. Presently, a 60-year-old buying Saral Pension Yojana will get pension at ₹51650 a year (single life), for a ₹10 lakh investment. For 40 or 50-year olds, this pension drops to ₹50650 and ₹51050 respectively. A 70-year old can expect ₹52500 a year. A 60-year-old would receive only ₹51250 under the joint life option compared to ₹51650 under the single life option.

While agents like to plug annuity plans based on the annuity rate which is at simple interest, it is best to use the IRR (Internal Rate of Return) to judge the true returns from such plans. After considering 1.8 per cent GST on your purchase price, the IRR for a 60-year-old investing in Saral Pension Yojana, who lives until the age of 85 works out to about 5.04 per cent per annum on the single life plan and 5 per cent on joint life, considering the return of purchase price.

Annuity income is taxable at your slab rate, lowering effective returns. Annuity rates on LIC Saral Pension Yojana are lower than those on Jeevan Akshay VII, which offers ₹53950 and ₹53650 for a ₹10 lakh purchase price on comparable single life and joint life options.

On the plus side, immediate annuity plans offer a guaranteed income without longevity risk. They may be suitable options for folks who aren’t good at money management or seek certainty above everything else. While choosing such plans, it is safer to go for insurers who are sure to stick around for as long as you live, even if their annuity rates are on the lower side, as LIC’s are.

But such plans offer far lower returns than other regular income alternatives available to seniors, such as the post office senior citizens scheme (current return 7.4 per cent), monthly income account (current rate 6.7 per cent) and GOI Floating Rate Savings Bonds (7.15 per cent). Once you lock into a certain rate in immediate annuity plans, your pension does not rise with inflation or upswings in rates throughout your life.

If predictable income is your main ask and you are 60, you should maximise your investment in Pradhan Mantri Vaya Vandana Yojana from LIC, upto its ceiling of ₹15 lakh, as it offers a 7.4 per cent return with a shorter 10-year lock-in.

Surpluses can be parked in small savings or bank deposits. Given that we are at the bottom of a rate cycle, waiting for an uptick in rates may fetch you better annuity rates even from immediate annuity plans.

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CCEA clears LIC IPO; may hit market in Q4 of FY22

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The Initial Public Offer (IPO) of Life Insurance Corporation of India (LIC) moved one more step with the Cabinet Committee of Economic Affairs (CCEA) green-lighting it.

“The CCEA has given in-principle approval,” a senior government official told BusinessLIne. Although the IPO timeline is not set, it is expected to hit the market in the fourth quarter of 2020-21. Also, there is no clarity on the size of IPO, but experts expect this to be the largest ever in India. The Centre has already notified all amendments to the LIC Act, 1956 to facilitate the IPO.

Earlier this month, in an interview to BusinessLine, Finance Minister Nirmala Sitharaman had said the LIC IPO “is on course”. However, she refused to give a timeline fearing it will lead to speculation.

FM blows the privatisation bugle

The CCEA nod is the second big move for the LIC IPO. On June 19, based on decisions by SEBI, the Finance Ministry notified relaxed norms for large companies planning to enter the stock market.

LIC IPO: Government likely to invite bids from merchant bankers this month

The IPO of LIC is critical as the Government needs resources to meet its steeply stepped up spending to tackle the Covid-19 pandemic. The Centre has set a target of mopping up ₹1.75-lakh crore through disinvestment, with ₹1-lakh crore expected from sale of stake in public sector banks and financial institutions. As on date, ₹7,645.7 crore has been collected.

LIC’s auditor appointment made a board process, ahead of IPO

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IDBI Bank sale: Deadline for transaction, legal advisors’ bids extended till July 22

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The Government has extended the deadline for transaction and legal advisors to bid for managing the IDBI Bank strategic sale by nine days till July 22.

The Department of Investment and Public Asset Management (DIPAM) had on June 22 invited bids from merchant bankers and law firms for managing and giving legal advice for the sale process. The last date to put in bids was July 13.

“The competent authority has decided to extend the bid submission date of the tender by nine days. The last date of bid submission will now be July 22, 2021,” the DIPAM said in a notice.

DIPAM, which manages government’s equity, had also clarified to the merchant bankers that LIC’s holding in IDBI Bank would be sold along with government’s stake, but the exact quantum of stake dilution would be decided later.

The Central Government and LIC together own more than 94 per cent equity of IDBI Bank.

LIC, currently having management control, has a 49.24 per cent stake, while the government holds 45.48 per cent in the bank. Non-promoter shareholding stands at 5.29 per cent.

The cabinet in May had approved the strategic sale of the entire stake of government and Life Insurance Corporation (LIC) in IDBI Bank.

In response to queries received from potential transaction advisors in IDBI Bank, DIPAM has clarified that since LIC’s stake would be sold along with that of the government’s, a single transaction advisor would manage the entire share sale process.

“The mandate received from CCEA is to offload up to 100 per cent stake of GoI and LIC along with transfer of management control. However, the exact quantum is yet to be worked out. It will be determined, as we go through the transaction and ascertain investors’ interest and market appetite.

“It is clarified that LIC’s stake will be sold along with GoI’s shareholding in this transaction. So there is only one transaction advisor,” it said.

The quantum of stake dilution would be declared before RFP (Request for Proposal) stage of the transaction, it added.

Finance Minister Nirmala Sitharaman in her Budget for 2021-22 had said the process of privatisation of IDBI Bank would be completed in the current fiscal. The government aims to mop up Rs 1.75 lakh crore in the current fiscal from minority stake sale and privatisation.

Of the Rs 1.75 lakh crore, Rs 1 lakh crore is to come from selling government stake in public sector banks and financial institutions. Rs 75,000 crore would come as CPSE disinvestment receipts.

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Govt extends deadline for transaction, legal advisors to bid for managing IDBI Bank sale till Jul 22, BFSI News, ET BFSI

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NEW DELHI: The government has extended the deadline for transaction and legal advisors to bid for managing the IDBI Bank strategic sale by 9 days till July 22.

The Department of Investment and Public Asset Management (DIPAM) had on June 22 invited bids from merchant bankers and law firms for managing and giving legal advice for the sale process. The last date to put in bids was July 13.

“… The competent authority has decided to extend the bid submission date of the… tender by nine days. The last date of bid submission will now be July 22, 2021,” the DIPAM said in a notice.

DIPAM, which manages government’s equity, had also clarified to the merchant bankers that LIC’s holding in IDBI Bank would be sold along with government’s stake, but the exact quantum of stake dilution would be decided later.

The central government and LIC together own more than 94 per cent equity of IDBI Bank.

LIC, currently having management control, has a 49.24 per cent stake, while the government holds 45.48 per cent in the bank. Non-promoter shareholding stands at 5.29 per cent.

The cabinet in May had approved the strategic sale of the entire stake of government and Life Insurance Corporation (LIC) in IDBI Bank.

In response to queries received from potential transaction advisors in IDBI Bank, DIPAM has clarified that since LIC’s stake would be sold along with that of the government’s, a single transaction advisor would manage the entire share sale process.

“The mandate received from CCEA is to offload up to 100 per cent stake of GoI and LIC along with transfer of management control. However, the exact quantum is yet to be worked out. It will be determined, as we go through the transaction and ascertain investors’ interest and market appetite.

“It is clarified that LIC’s stake will be sold along with GoI’s shareholding in this transaction. So there is only one transaction advisor,” it said.

The quantum of stake dilution would be declared before RFP (Request for Proposal) stage of the transaction, it added.

Finance Minister Nirmala Sitharaman in her Budget for 2021-22 had said the process of privatisation of IDBI Bank would be completed in the current fiscal. The government aims to mop up Rs 1.75 lakh crore in the current fiscal from minority stake sale and privatisation.

Of the Rs 1.75 lakh crore, Rs 1 lakh crore is to come from selling government stake in public sector banks and financial institutions. Rs 75,000 crore would come as CPSE disinvestment receipts.



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LIC puts 15 bad loan accounts including DHFL, RCom on block ahead of IPO, BFSI News, ET BFSI

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LIC has put on block its fully provided 15 bad loan accounts, including DHFL, RCom and IL&FS, on sale as it cleans up books ahead of its initial public offering.

The accounts that are put on sale include DHFL (Rs 2,610 crore), RCom (Rs 2,200 crore), Reliance Capital (Rs 775 crore), Amtek Auto (Rs 380 crore) and Jaiprakash Associates (Rs 313 crore) and IL&FS (Rs 300 crore).

The corporation has brought down its net non-performing assets to 0.05% as of March 2021 from 0.79% as of March 2020 and is selling its fully provided NPAs.

The corporation has fully provided for these loans and the sale would improve the quality of its portfolio. The corporation is selling its default debt in a phased manner.

IDBI Capital Markets is offering LIC’s loans to asset reconstruction companies, banks, NBFCs, and alternate

investment funds. The potential buyers must sign a non-disclosure agreement. The investment bank may resort to the Swiss challenge method of selling where the rivals will be given an option to improve on the best bid. Some of the loans were being sold because of a regulatory requirement.

Gearing up for IPO

As part of its IPO plans, the corporation plans to audit its half-yearly accounts for the period ended September 2021.

Traditionally, the corporation has been publishing only full-year accounts. The half-yearly accounts are likely to include the embedded value — a valuation method unique to insurance companies that includes the net present value of future earnings from policies. LIC has appointed Milliman as the actuary for the process and EY as the advisers.

The corporation is simultaneously engaged in the recast of its capital base that will enable the distribution of shareholding over a much wider base.

No Chairman post

LIC will now have the post of Chief Executive Officer and Managing Director instead of the Chairman position, with the government making changes to relevant rules ahead of the IPO.

The changes have been made by the Department of Financial Services under the finance ministry by amending Life Insurance Corporation of India (Employees) Pension (Amendment) Rules. Besides, some other rules under LIC Act, 1956, have been amended.

“Chief Executive and Managing Director means the Chief Executive Officer and Managing Director appointed by the Central Government under section 4 of the Act (LIC Act 1956),” according to a gazette notification issued on July 7.

To facilitate the listing of the insurance behemoth, the government has already approved raising its authorised share capital to Rs 25,000 crore.

Besides, the Department of Economic Affairs under the finance ministry recently amended the Securities Contracts (Regulation) Rules.

Companies that have a market capitalisation of more than Rs 1 lakh crore at the time of listing can now sell just five per cent of their shares, with the latest amendment in rules, a move that will be beneficial for the government during the LIC initial public offer.

Such entities will be required to increase its public shareholding to 10 per cent in two years and raise the same to at least 25 per cent within five years.



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CDSL becomes the first depository to open 4- crore active Demat accounts, BFSI News, ET BFSI

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Central Depository Services (India) Limited (CDSL), India’s leading and only listed depository, has announced the first depository to open Four crores plus (40 million) active Demat accounts.

CDSL is currently the largest depository in the country in terms of active Demat accounts.

CDSL facilitates holding and transacting in securities in the electronic form and facilitates settlement of trades on stock exchanges.

CDSL has an objective of delivering quality services and innovative products. Since the financial services industry has become increasingly IT-reliant, CDSL is adopting technology as a part of its strategic vision. Major shareholders of CDSL include BSE, Canara Bank, HDFC Bank, LIC and Standard Chartered Bank.

Nehal Vora, CEO of CDSL said “I will firstly congratulate SEBI – the capital market regulator for being the visionary leader that guided us to this digital growth and safe ecosystem. It is their foresight that transited the long Demat account opening procedure into an easy digital experience without compromising on the necessary controls. Our milestones are a result of the hard work and coordination of all the market infrastructure institutions and the market intermediaries. I wish to thank the investors for choosing CDSL to be their depository. I would like to thank all the participants of the capital market for their contribution in accelerating the digital and financial growth of India.”

This journey of financial inclusion has to enhance to engage with a higher number of persons to foray into the securities market to achieve the objective to make India a capital market hub that is highly focused on corporate governance, technology, investor protection, transparency, and sustainability.

Further, CDSL will continue to provide services for the progress of the securities markets, for the valued investors in line with our vision of “Empowering the Atma-nirbhar Niveshak” through our digital services.”



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LIC’s auditor appointment made a board process, ahead of IPO

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The Centre has taken one more step towards making Life Insurance Corporation (LIC) ‘IPO ready’ by turning the statutory auditor appointment into a board driven process, in line with SEBI’s listing requirements. Hitherto, the statutory auditor for central office and zones required the Centre’s approval.

The Finance Ministry’s Department of Financial Services has amended the LIC Rules, 1956 for a new framework on the selection of auditors.

No longer will the government appoint the auditor, but it will be the shareholders at the Annual General Meeting, according to LIC observers.

Under the new process, LIC’s Audit Committee will recommend to the board for adoption a policy for selection of auditors. On the Board adopting this policy, the Audit Committee will draw up a panel of auditors and recommend to the board an individual or a firm for appointment. The board will then place the matter before shareholders for their approval at the AGM.

 

SN Ananthasubramanian, former ICSI President and practising company secretary, said: “The amendments to the LIC Rules which introduce various aspects of board-monitored governance, are essentially to make LIC IPO ready.”

Ashok Haldia, former CA Institute Secretary, said that the overhaul in auditor appointment provisions, “together with other amendments to the LIC Act/Rules is a step that could enhance corporate governance and transparency, giving more comfort to investors looking to come on board LIC,”

The Centre has brought made 27 amendments to the LIC Act through this year’s Finance Act. It is expected to issue later this month a request for proposals/expression of interest for appointment of merchant banks for the mega LIC IPO, which is set to mop-up at least ₹1-lakh crore for the government. While retaining its ‘corporation’ status, the government is moving to align the LIC Act’s corporate governance provisions with SEBI’s listing requirements. Recently, the government tweaked Securities Contracts Rules to enable public float of large issuers (like LIC), eyeing post listing market capitalisation of over ₹1-lakh crore.

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