Form of words:
New Delhi: According to a person with knowledge of the matter, India is considering an offer of up to 20% for foreign investors in Life Insurance Corporation, which would enable them to participate in the country’s biggest initial public offering.
Under discussion are plans to amend FDI rules so that investors can pick up stake without government approval under the so-called automatic route, the person said, noting to be identified as deliberations are private. The person said government officials will meet in New Delhi on Wednesday afternoon and discuss the proposal.
A finance ministry spokesperson did not immediately respond to calls seeking comment.
Prime Minister Narendra Modi’s government is relying on funds from the state-run insurer’s IPOs to meet its budget deficit target for the fiscal year through March 2022 as the pandemic hit tax collections. While FDI up to 74 per cent is allowed in most Indian insurance companies, the rules do not apply to LIC as it is a special entity created by an Act of Parliament.
The Reserve Bank of India defines FDI as the purchase of a stake in a listed company of 10% or more by a person or entity located abroad, or any foreign investment in an unlisted firm. Hence the approval for FDI in LIC not only allows global funds to participate in IPOs, but also opens doors for a significant stake purchase post listing.
Bloomberg had reported that the government is seeking a valuation of Rs 8 trillion to Rs 10 trillion ($134 billion) for LIC, and is considering a stake sale of 5%-10%, which would be between Rs 400 billion and Rs 1. trillion may be between Rs. East.
Banks began engaging with investors last month, with potential listings between January and March 2022. –bloomberg
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