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Indian govt is considering allowing foreign institutional investment of up to 20% in Life Insurance Corporation, according to a Reuters report citing a government source.

The listing of LIC is set to be India's biggest-ever IPO, with the government aiming to raise up to $12.24 billion from its stake sale.

The Union Cabinet recently approved the disinvestment of equity in LIC and the process is on to appoint merchant bankers to launch the IPO.

The government has for the second time invited bids from law firms to advise it on the mega initial public offering of LIC.

A panel headed by Finance Minister Nirmala Sitharaman will decide on the size of the share sale.

For LIC’s IPO, the center amended the LIC Act of 1956. After the amendment, like any other listed company, the corporation, now governed by the Companies Act and markets regulator Act (post-IPO), has to prepare its quarterly balance sheet with profit or loss figures and make public key developments.

The markets regulator has also amended the rules to allow a company with a valuation of more than 1 lakh crore to go for IPO equivalent to 5% of the total value.

LIC has appointed Arijit Basu, former MD of State Bank of India (SBI) and former MD & CEO of SBI Life Insurance, as a consultant to help launch the IPO.

After the IPO, about 60% of the insurance business will be with listed companies.

The government has given LIC policyholders a reason to cheer as 10% of the issue size would be reserved for them.

IPO of India's biggest insurer is part of the government's efforts to raise 1.75 lakh crore through disinvestment in the current financial year.

So far this fiscal, 8,368 crore has been mopped up through minority stake sales in PSU and sale of SUUTI stake in Axis Bank.

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