New Delhi The government has amended the rules of the Foreign Exchange Management Act (FEMA), paving the way for foreign direct investment of up to 20 per cent in insurance giant LIC.
The government is planning to reduce its stake in LIC through an initial public offering (IPO). LIC had in February filed a draft red herring prospectus (DRHP) with markets regulator Sebi for the IPO.
Last month, Sebi had cleared the draft papers and the insurer is in the process of filing request for proposal with changes.
Following Cabinet approval, the Department for Promotion of Industry and Internal Trade (DPIIT) had on March 14 amended the Foreign Direct Investment (FDI) policy to facilitate foreign investment in LIC ahead of the mega public offer.
The FEMA notification was required to implement the provisions of DPIIT, issued through a press note, including changes to the FDI policy, which would allow large foreign portfolio investors to subscribe to shares. LIC.
“These rules may be called the Foreign Exchange Management (Non-Debt Instruments) (Amendment) Rules, 2022,” said a gazette notification issued recently.
The notification has inserted a clause in the existing policy, allowing up to 20 per cent FDI in LIC through the automatic route.
Since the foreign inflow limit for public sector banks is 20 per cent under the government approval route as per the extant FDI policy, it has been decided to allow foreign investment up to 20 per cent in LIC and other such corporate bodies.
“Foreign investment in LIC shall be subject to the provisions of the Life Insurance Corporation Act, 1956, (LIC Act) as amended from time to time and the Insurance Act, 1938, as amended from time to time, as may be applicable to LIC,” it said. .
Setting the stage for the country’s biggest ever public offering, SEBI has approved the draft prospectus for the sale of 5 per cent stake projected by the government. 63,000 crores.
As per the draft paper, the embedded value of LIC, a measure of the value of consolidated shareholders in an insurance company, is pegged at approximately 5.4 lakh crore by international actuarial firm Milliman Advisors till September 30, 2021.
Though DRHP does not disclose the market valuation of LIC, by industry standards it would be around or around three times the embedded value. 16 lakh crore.
LIC Public Issue is expected to 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.
Till date, the amount raised from Paytm’s IPO in 2021 was the largest ever 18,300 crore, followed by Coal India (2010) approx. 15,500 crore and Reliance Power (2008). 11,700 crores. PTI DP HVA