Working group monitoring back-end tech readiness for LIC IPO: DIPAM Secy

In a Q&A, Tuhin Kanta Pandey that as crores of applications are expected, testing to that scale is needed to avoid hiccups in the application process and movement of funds

A working group has been constituted to check the technology (tech) readiness level for Life Insurance Corporation (LIC) of India's initial public offering (IPO) - estimated to be India’s largest listing and expected to receive massive investor response. Department of Investment and Public Asset Management (DIPAM) Secretary TUHIN KANTA PANDEY in conversation with Nikunj Ohri says with millions of applications anticipated, thorough testing is required to avoid glitches in the application process and movement of funds. He says while the Revised Estimates (RE) for divestment factor in the LIC IPO proceeds, they were also made when the size of the IPO had not been finalised. Edited excerpts:

What has been the preparedness for LIC IPO?

 We will come out with a draft red herring prospectus (DRHP) for LIC IPO in a week/10 days. The government is holding parallel consultations with the Insurance Regulatory and Development Authority of India and the Securities and Exchange Board of India (Sebi). 

Given the size of the transaction and its uniqueness, a continual engagement is necessary. It's one of the biggest listings so far. Sebi also has to take steps to ensure everything goes smoothly. Tech assessments have been carried out by Sebi, as well as seamless back-end procedures. Banks/sponsor banks, Unified Payments Interface (UPI), application processing, allocation, and moving of funds, among others, are being tested.

A working group has been constituted to include members from Sebi, banks, UPI, share transfer agents, and other intermediaries. Given that millions of applications are expected, testing to scale is required to avoid last-minute hiccups in the application process and movement of funds. The working group has been functional for two months. Banks are also strengthening their information technology apparatus. 

Estimated proceeds from the LIC IPO considered in the Revised Budget Estimates.

RE for divestment considers the LIC IPO proceeds, but the estimates were made at a time when the size of the IPO had not been finalised. Until we get the money, we cannot be accurate down to the last detail. Some idea will be given in the DRHP via the IPO size. The valuation of LIC has not been decided as yet. 

Does the listing of LIC compromise policyholders’ interest, given it has to now focus on shareholder profitability?

The regulations do not allow sharing of more than 10 per cent surplus with shareholders in the case of participating products; rest is shared with policyholders. It’s only in non-participating products, policyholders do not receive any surplus. There's also a policyholders' reasonable expectations (PRE) concept that has to be met. When policies are sold, a certain PRE is given to the policyholder. 

Which other divestments will be completed this fiscal year?

I cannot give a low-down on that. Our focus is largely on LIC because that is a big transaction, and not an easy one at that. If we are able to pull it off, we will be able to prove to the world that we have indeed completed two big strategic disinvestments - Air India and LIC — despite two debilitating pandemic waves. 

What will be the focal point next year?

We have ongoing transactions and many in lined up. Certain transactions are at advanced stages, some at due diligence stage. For some, an expression of interest (EoI) will be issued. Bidder interest and due diligence are different for different transactions. Some transactions get completed quicker, some consume time. 

In non-strategic sectors, Nagarnar Steel Plant will be next. It’s demerger process has been filed. The EoI for Rashtriya Ispat Nigam (also known as Vizag Steel) will be issued soon.

What is the privatisation status of two public sector banks?

The job will be handled by the Department of Financial Services, and legislation will be moved at an opportune time. 

What has been the progress on asset monetisation?

The NITI Aayog is handling the asset monetisation process, and around Rs 26,769 crore has been realised through asset monetisation, of the Rs 88,000 crore targeted for this year. Monetisation of more assets is in the pipeline. 

How will monetisation of 3,200 acres of land identified by public sector undertakings be done?

Until a special purpose vehicle (SPV) is functional, it can be done by others like NBCC (India), acting as a land management agency. It is also trying to help out some central public sector enterprises. Once a specialised SPV is functional, things will move quick. 

Will Central Electronics privatisation be undertaken again?

A final view has not been taken, and some allegations are erroneous. The employees’ association has said that the value of land is Rs 440 crore, which is flawed. It’s not freehold land, but on a 90-year lease, of which 46 years have elapsed. Liabilities of the company will also be passed on to the buyer, who is not just buying assets.

However, on the issue of the ongoing National Company Law Tribunal and National Company Law Appellate Tribunal cases, we are legally examining whether disclosures are required to be made.