LIC IPO: Govt amends fee structure for legal advisors

After the first attempt to appoint legal advisors for the initial public offering (IPO) of Life Insurance Corporation of India (LIC) failed, the government has amended the fee structure for law firms to make it attractive.

The Department of Investment and Public Asset Management (DIPAM) has introduced “milestone payments” by amending its request for proposal (RFP) for the engagement of legal advisors for the LIC IPO. Earlier, legal advisors were supposed to get their fee “after successful and satisfactory completion of the transaction”.

Now, the successful law firm will receive 50 per cent of the fee after the filing of the Draft Red Herring Prospectus (DRHP) and the remaining after listing of LIC shares. Interested law firms can quote their fee as low as ~1.

The changes come after the government did not receive an adequate response from law firms for assisting in the LIC IPO. It has floated a new RFP to appoint a legal advisor, and specified that the validity of the financial bids shall be three years, implying that the law firm shall assist LIC and the government for three years from the time of placing the bid. The previous bid document had stated bidders cannot prescribe any time limit for the validity of the financial bid.

Law firms will have to submit their bid by September 16. Legal advisors are required to submit a proposal in a consortium with an international law firm with similar experience and expertise in public offerings in the capital markets. The international law firm, with whom domestic law firms would tie up, should have the experience of managing Indian capital market transactions as advisers or underwriters.