The increased FDI inflows will complement domestic capital, technology transfer, skill development for accelerated economic growth and growth across sectors.
Sources said the government on Saturday allowed foreign direct investment (FDI) of up to 20 per cent under the automatic route in IPO-bound LIC with a view to facilitate disinvestment of the country’s largest insurance company.
The decision in this regard was taken by the Union Cabinet headed by Prime Minister Narendra Modi. The government has approved listing of LIC’s shares in the stock market through IPO.
Foreign investors may be interested in participating in the mega IPO. However, the extant FDI policy does not have any specific provision for foreign investment in LIC, which is a statutory corporation established under the LIC Act, 1956.
Since as per the extant FDI policy, the foreign inflow limit for public sector banks under the government approval route is 20 per cent, it has been decided to allow foreign investment up to 20 per cent for LIC and other such corporate bodies.
Further, to expedite the process of raising capital, such FDI has been placed under the automatic route, as is the case with the rest of the insurance sector, said a source.
The increased FDI inflows will complement domestic capital, technology transfer, skill development for accelerated economic growth and growth across sectors.
Sources said other minor reforms have also been made in the existing FDI policy to provide an updated, consistent and easily understandable FDI framework.
The FDI policy currently lists only ‘insurance company’ and ‘intermediary or insurance intermediary’ under the insurance sector.
LIC being a statutory corporation, does not come under insurance company or intermediaries or insurance intermediaries and no limit has been prescribed for foreign investment in LIC under the LIC Act, 1956; Insurance Act, 1938; Rules made under the Insurance Regulatory and Development Authority Act, 1999 or related laws.
In addition, with the intention of improving the overall FDI policy, certain changes and alignments have been made under various provisions of the policy.
“The reforms in the FDI policy will have several benefits. It will facilitate foreign investment in LIC and such other corporate bodies for which the government may require for disinvestment purposes.
“The reforms will facilitate ease of doing business and increase FDI inflows, and at the same time, ensure alignment with the overall intent/objective of the FDI policy,” a source said.
Setting the stage for the country’s biggest ever public offering, Life Insurance Corporation on February 13 filed draft papers with capital markets regulator SEBI for sale of 5 per cent stake by the government for an estimated Rs 63,000 crore.
The initial public offering (IPO) of over 316 crore shares or 5 per cent government stake is likely to hit D-Street in March. Employees and policyholders of the insurance giant will get a discount on the floor price.
According to the draft Red Herring Prospectus (DRHP), the embedded value of LIC, which is a measure of the value of consolidated shareholders in an insurance company, has been pegged at around Rs 5.4 lakh crore by international actuarial firm Milliman as of September 30, 2021. Advisor.
Though DRHP does not disclose the market valuation of LIC, it would be almost three times the embedded value or around Rs 16 lakh crore by industry standards.
LIC Public Issue will be the biggest IPO in the history of Indian stock market. Once listed, LIC’s market valuation will be at par with top companies like RIL and TCS.
So far, the amount raised from Paytm’s IPO in 2021 was the largest at Rs 18,300 crore, followed by Coal India (2010) at around Rs 15,500 crore and Reliance Power (2008) at Rs 11,700 crore.
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