Govt okays 20 percent foreign investment in LIC ahead of mega IPO
The decision, taken during the meeting chaired by Prime Minister Narendra Modi, could lay the path for foreign investors who are keen to take part in the upcoming Initial Public Offering of LIC in March.
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FollowThe Union Cabinet has on Saturday reportedly approved a proposal to allow foreign direct investment up to 20 percent in Life Insurance Corporation through the automatic route.
The decision, taken during the meeting chaired by Prime Minister Narendra Modi, could lay the path for foreign investors who are keen to take part in the upcoming Initial Public Offering of LIC in March.
The LIC IPO, which is considered to be India’s largest public offering, is expected to raise about Rs 63,000 crore rupees by selling its five percent stake in LIC through IPO.
According to sources, the decision to allow 20 percent FDI was taken to streamline the process of disinvestment of the country's largest insurance company, sources said.'
Increasing FDI will help in domestic capital, technology transfer, skill development for strong economic growth and development in other sectors. The government had approved the proposal to bring LIC's IPO in July last year.
The FDI policy reform will further enhance the Ease of Doing Business in the country and thereby lead to enhanced FDI inflows, sources said.
To note, the present FDI policy allows foreign investment in the insurance sector, but not LIC as it is a statutory corporation that does not fall either under the 'Insurance company' category or the 'Insurance intermediaries' category. Besides, the existing regulation did not outline any specific provision for foreign investment in LIC.
The sources further noted that 20 percent foreign investment was allowed for LIC as the FDI ceiling for public sector banks was also at 20 percent on the government approval route.
LIC submitted the Draft Hiring Prospects (DRHP) for this IPO on February 13, 2022. The IPO of the country's largest insurance company is likely to come in March. The IPO will offer a five percent government stake or 316 million shares. According to LIC, its policyholders and employees would get a discount over the floor price.
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