Cabinet has approved 20 percent foreign direct investment in LIC through automatic route
Paving the way for foreign funds to participate in the much-awaited Initial Public Offering (IPO) of Life Insurance Corporation of India (LIC), the Union Cabinet on Saturday approved foreign direct investment (FDI) of up to 20 per cent in Life Insurance Corporation of India (LIC) under the automatic route. FDI) approved. State owned insurer.
Official sources said the decision was taken in the cabinet meeting held earlier in the day. He said that a special provision has been included in the FDI policy to allow 20 per cent foreign investment through the automatic route.
This has been done because in the current FDI policy, the foreign inflow limit for public sector banks is 20 per cent under the government approval route, it has been decided to allow foreign investment up to 20 per cent for LIC and other such corporate bodies. has gone.
Sources said the automatic route has been included as the government is keen to expedite the process of raising funds in LIC through IPO and facilitate stake sale in LIC within this financial year itself.
The cabinet decided to allow 20 per cent FDI in LIC through the automatic route as there is no such provision in LIC Act 1956, Insurance Act 1938 and even Insurance Regulatory and Development Authority Act 1999.
Earlier, LIC had on February 13 filed a draft letter with capital markets regulator Securities and Exchange Board of India (SEBI) for sale of 5 per cent stake by the government for an estimated Rs 63,000 crore.
IPO of over 316 crore shares or 5 per cent government stake is likely to hit the markets 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 Reliance Industries Limited and Tata Consultancy Services.
So far, the amount raised from Paytm’s IPO in 2021 was the biggest ever at Rs 18,300 crore, followed by Coal India (in 2010) at around Rs 15,500 crore and Reliance Power (in 2008) at Rs 11,700 crore.
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