Edelweiss voluntarily withdraws from LIC pre-IPO transaction advisor selection

Mumbai: Edelweiss Financial Services NSE -4.40 % has voluntarily withdrawn from the government’s selection process for the two pre-IPO transaction advisors for the state-run Life Insurance Corporation of India’s (LIC) giant initial public offer (IPO), a source with the knowledge of the matter said.

LIC is the largest insurer in India, and its listing could be India’s biggest ever, and has attracted a lot of interest for the role of transaction advisors, of which 11 players were being screened. The proposal to list LIC was announced in the Union Budget by Finance Minister Nirmala Sitharaman.

Edelweiss has informed the government of the decision, but is yet to hear back, the person cited above said. It had gone through the three-stage process and was among the five finalists, of which two would be selected. The other companies that are still in the race are Deloitte, Citigroup, Credit Suisse and SBICaps. The decision to withdraw came in light of an objection that Edelweiss was a competitor to LIC due to its group company Edelweiss Tokio Life Insurance Co.

“Edelweiss was ticking all the boxes, and all disclosures were given. Someone has raised an objection on conflict of interest. Typically, in this scenario, the conflict has to be of substantial nature. Edelweiss Tokio is not a very big player. There would have been a case of conflict if we were handling any other life insurance mandates simultaneously,” the person cited above said.

An advisor for pre-IPO would advise the government and LIC on the structure of the offering -- capital structure -- and timing, among other key issues. The scope of the LIC pre-IPO mandate includes advising the government on the modalities of the IPO and the timing, arriving at an optimal capital structure, preparing restated consolidated financial statements for the past three years for LIC and its subsidiaries and structuring the transaction, among other aspects.

Edelweiss Tokio Life Insurance Co is a joint venture between Edelweiss Financial Services and Japan’s Tokio Marine. “Since a question was raised, Edelweiss did not want an overhang. Even though it feels it is a non-entity in terms of material conflict, it was best to voluntarily withdraw,” the person said.

Edelweiss qualified to be an advisor as it had previously managed the ICICI Lombard IPO and HDFC Life IPO in 2017. When asked to confirm the development, an Edelweiss spokesperson declined to comment.

Source: The Economic Times

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