Government approves 20% FDI in Life Insurance Corporation of India

Author: Nishu February 26, 2022

Potential investors in LIC's huge IPO upset over government control of the insurer


The move will expand the investor base for LIC’s IPO amid volatility in the market.

The government on Saturday approved changes to India’s foreign direct investment (FDI) policy to allow global investors to participate in the initial public offering of shares of Life Insurance Corporation of India (LIC), which is to be launched soon. are supposed to.

Government sources said foreign investors will now be able to invest up to 20 per cent in LIC’s shares under the automatic route. FDI in insurance enterprises is already allowed up to 74% under the automatic route, but the policy was silent on foreign equity investment in the country’s largest insurer LIC, a statutory corporation set up under an Act of Parliament.

An official source said, “As per the extant FDI policy, the FDI limit for public sector banks is 20% on the government approval route, hence it has been decided to allow foreign investment up to 20% for LIC and other such bodies.” Has gone.” Stating that approval has been made automatic for LIC investors to expedite capital raising plans.

The amendment to the FDI policy comes less than two weeks after the draft Red Herring Prospectus (DRHP) for LIC’s share sale was filed with the stock market regulator. Government is selling its 5% stake in LIC, 10% of these shares are reserved for policy holders of LIC and other 5% are reserved for employees.

The government is keen to kick off the listing process of LIC, which has an embedded value of ₹5.4 lakh crore, before the end of the financial year, as proceeds from share sale are crucial to meet the disinvestment target for the year, putting it down to Rs. has been modified. ₹ 1.75 Lakh Crore to ₹ 78,000 Crore.

Though the market has been rocked since the filing of LIC’s DRHP, Finance Minister Nirmala Sitharaman had indicated earlier this week that the government was going ahead with the IPO.

“Is the market condition favorable for LIC (listing), if it is good for LIC, then it is good for everyone else. If there are unfavorable conditions for LIC, it is also opposite for the rest,” she had said on Tuesday, adding that volatility in the financial market was triggered by overseas developments like the Ukraine crisis.

26 February, 2022, 7:43 pm

Tags: IPO
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