The divestment of LIC was set rolling by the finance ministry on Friday as it invited bids from consulting firms, investment bankers and financial institutions to advise it on the proposed initial public offer.

The government proposes to hire two advisers to assist the department of investment and public asset management (Dipam) in the preparatory stage of the initial public offer (IPO) of Life Insurance Corporation of India, tipped to be the largest ever in the country.

It is likely that the government would sell around an 8-10 per cent stake in LIC through the listing process. Analysts estimate LIC’s valuation in the range of Rs 9.9 lakh crore to Rs 11.5 lakh crore.

The valuation has been arrived at on the basis of market capitalisation as a percentage of the asset under management. LIC’s AUM stood at Rs 33.2 lakh crore as of December 2019.

An 8 per cent stake sale by the government could mean an IPO worth Rs 80,000-90,000 crore.

Given the size of the IPO and the huge spread of LIC’s operations, the government is likely to miss its target to sell the shares in this fiscal.

The advisers can submit their bids beginning Friday, till July 13, 2020. The bids would be opened by Dipam on July 14. The government has a 95 per cent stake in LIC, according to the RFP (request for proposal).

The adviser would ensure preparatory aspects of the proposed IPO and would advise and assist the government on the modalities of the IPO and the timing; structuring the transaction; organising non-deal roadshows, suggesting measures to fetch optimum value and positioning of the minority sale, among others, the RFP said.

LIC has been in the life insurance business since 1956. Its balance sheet size exceeds Rs 31 lakh crore. Its total investments in debt and equity exceed Rs 25 lakh crore.

The task for the bankers would be to scrutinise all the minute details of these investments while arriving at a valuation. Further, the real estate assets of LIC will also be part of the valuation process.

LIC’s equity capital stands at Rs 100 crore, which needs to be increased in order to sell even a 10 per cent stake. To deal with these issues, Dipam said the advisers will be required to evaluate the capital structure of LIC and advise the government and LIC on the optimal capital structure, including the authorised capital, face value and bonus ratio, and any other alternatives to restructure the capital base.

They will also have to help LIC prepare the restated consolidated financial statements for the past three years for the LIC group including its subsidiaries, branches and overseas operations, said the government.