The Department for Promotion of Industry and Internal Trade (DPIIT) on Monday notified the government’s decision to allow 20% foreign direct investment (FDI) in IPO-bound LIC.
The Union Cabinet last month approved the decision to facilitate disinvestment of the country’s largest insurance company, paving the way for a smoother road ahead of LIC’s mega initial public offer.
As of now, the FDI policy has not prescribed any specific provision for foreign investment in LIC, which is a statutory corporation established under the LIC Act, 1956. This policy allows FDI in insurance companies and intermediaries or insurance intermediaries in the insurance sector. The FDI limit for public sector banks on the government approval route is 20%.
Since LIC does not fall under any of these categories and there is no limit prescribed for foreign investment in LIC under the LIC Act, the government has decided to allow foreign investment up to 20% for LIC and such other bodies corporate .
The government is planning to take LIC to the markets soon by selling its 5% stake in the largest insurer, which is likely to generate huge interest among foreign investors.
The change in FDI policy for LIC will ensure that such investors do not face any hurdle in subscribing to the public offering.
According to Bloomberg, the government is looking at a mid-May timeline to launch its largest insurer’s mega initial public offering, with hopes that Russia’s invasion of Ukraine will ease market volatility.
LIC’s published embedded price will be valid for IPO till May as per rules. Any further delay would mean that LIC would have to re-calculate embedded value, a key valuation gauge for insurance firms, based on the latest financials.
According to a Bloomberg report, the market volatility index for India is around 15, which will be a comfortable level for the government to launch an IPO. The India NSE Volatility Index was at around 26 in Mumbai on Monday, higher than the previous year’s average of 17.9. It touched this fiscal’s high of 31.98 on February 24.
This story has been published without modification in text from a wire agency feed. Only the title has been changed.
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