The government on Saturday allowed up to 20 per cent foreign direct investment (FDI) in the IPO-bound LIC under the automated route to facilitate investment by the country’s largest insurer, sources said.
The decision was taken by the Union Cabinet, chaired by Prime Minister Narendra Modi. The government has approved the listing of LIC’s shares in the stock market through an IPO by selling insurer’s shares and raising new equity capital.
Foreign investors may be interested in participating in the mega IPO. However, the existing FDI policy does not specify any specific provisions for foreign investment in LIC, a statutory corporation established under the LIC Act, 1956.
As per the current FDI policy, the foreign exchange limit for state-owned banks under the government approval route is 20 per cent, so it has been decided to allow up to 20 per cent foreign investment for LIC and other such corporate entities.
Moreover, in order to expedite the process of raising capital, such FDI has been placed under automatic route, as was the case with the rest of the insurance sector, a source said.
Increased FDI inflows will complement domestic capital, technology transfer, skills development for accelerated economic growth and development across the sector.
Sources said that other minor enhancements to the current FDI policy have also been made to provide an updated, consistent and easily understandable FDI structure.
FDI policies currently list only ‘insurance companies’ and ‘intermediaries or insurance intermediaries’ under the insurance sector.
As LIC is a statutory corporation, it is not subject to insurance companies or intermediaries or insurance intermediaries and no limit has been set for foreign investment in LIC under the LIC Act, 1956; Insurance Act, 1938; Regulations made under the Insurance Regulatory and Development Authority Act, 1999 or the relevant law.
Further, in order to improve the overall FDI policy, some changes and alignments have been made under different provisions of the policy.
“There are several benefits to reforming FDI policy. It will facilitate foreign investment in LIC and other such corporate entities, which may require government investment.
“The reform will make it easier to do business and lead to greater FDI inflows, and at the same time, ensure that FDI policy is aligned with the overall objective / objective,” a source said.
Life Insurance Corporation, the country’s largest ever public offering platform, on February 13 submitted a draft paper to capital market regulator Sebi for the sale of 5 per cent shares by the government at an estimated cost of Rs 63,000 crore.
An initial public offering (IPO) of more than 31.6 crore shares or 5 per cent government shares could hit D-Street in March. Insurance Behemoth employees and policyholders will get a discount on the floor price.
According to the draft Red Herring Prospectus (DRHP), the embedded value of LIC by the international actuarial firm Milliman as of September 30, 2021, which measures the value of shareholders consolidating in an insurance company, has been set at around Rs 5.4 lakh crore. Advisers.
Although DRHP does not disclose the market value of LIC, according to industry standards, it will be about three times the embedded value or about Rs 16 lakh crore.
LIC Public Issue will be the largest IPO in the history of Indian stock market. Once listed, LIC’s market valuation will be comparable to that of top companies like RIL and TCS.
So far, the highest amount collected from Paytm’s IPO in 2021 was 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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