DPIIT notifies 20% FDI in LIC under automatic route
- The Union Cabinet had last month approved the decision to facilitate disinvestment of the country's largest insurer.
The Department for Promotion of Industry and Internal Trade (DPIIT) on Monday notified a government decision to allow 20% foreign direct investment (FDI) in IPO-bound LIC.
The Union Cabinet had last month approved the decision to facilitate disinvestment of the country's largest insurer, paving for a smoother road ahead of LIC's mega initial public offer.
Till now, the FDI policy did not prescribe any specific provision for foreign investment in LIC which is a statutory corporation established under LIC Act, 1956. The policy permits FDI in insurance companies and intermediaries or insurance intermediaries in the insurance sector. The FDI ceiling for public sector banks is 20% on government approval route.
Since LIC does not fall in any of these categories and no limit is prescribed for foreign investment in LIC under the LIC Act, the government has decided to allow foreign investment up to 20% for LIC and such other bodies corporate.
The government is planning to take LIC to the markets soon by selling 5% of its holding in the largest insurer, which is likely to generate huge interest among foreign investors.
The change in the FDI policy for LIC will ensure that such investors do not face any hurdles while subscribing for the public offer.
The government is looking at a mid-May timeline for launching the mega initial public offering of its largest insurer with hopes that the market volatility triggered by Russia’s invasion of Ukraine will subside, according to Bloomberg.
LIC's published embedded value will be valid for the IPO until May as per rules. A delay beyond that would mean LIC would have to re-calculate the embedded value, a key valuation gauge for insurance firms, based on the latest financials.
A market volatility index for India around 15 will be a comfortable level for the government to launch the IPO, according to the said bloomberg report. India NSE Volatility Index was at about 26 in Mumbai on Monday, higher than an average of 17.9 in the past year. It touched the highest level this fiscal year at 31.98 on 24 February.
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First Published:14 Mar 2022, 09:29 PM IST
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