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LIC IPO: The Union Cabinet on Saturday permitted up to 20 per cent foreign direct investment (FDI) under automatic route in Life Insurance Corporation of India (LIC), which is about to launch its much-awaited initial public offering in a few days, news agency PTI reported, citing sources. LIC has been permitted up to 20 per cent FDO in order to facilitate the disinvestment process, the news agency reported.

The decision to allow 20 per cent FDI in LIC was taken by the Cabinet led by Prime Minister Narendra Modi. The Department for Promotion of Industry and Internal Trade (DPIIT) had mooted the proposal to allow FDI in LIC, after taking views from the ministry of finance.

The Cabinet in July 2021 had approved the LIC IPO, and the stake sale is being planned for the current March quarter.

Current FDI policy:

India's current policy of 74 per cent FDI under the automatic route in the insurance sector does not apply to state-run insurance behemoth since it's administered through a separate LIC Act.

As per Sebi rules, both FPI and FDI are permitted under public offer. However, since the LIC Act has no provision for foreign investments, there is a need to align the proposed LIC IPO with Sebi norms regarding foreign investor participation.

All about LIC IPO:

As per information available, the much-awaited IPO could hit the market in March, and LIC's employees and policyholders would get a discount over the floor price.

As per the DRHP, LIC's embedded value, a measure of the consolidated shareholders' value in LIC, has been pegged at about 5.4 lakh crore as of September 30, 2021, by international actuarial firm Milliman Advisors.

Some estimates suggest that LIC's market valuation after the IPO would be around three times the embedded value at around 16 lakh crore.

FM on LIC IPO amid Russia-Ukraine crisis:

The draft red herring prospectus (DRHP) of LIC IPO was filed with the Securities and Exchange Board of India (Sebi) earlier this month, with the government planning to sell up to 316.25 million shares or nearly 5 per cent stake in the life insurance giant for an estimated 63,000 crore.

Union finance minister Nirmala Sitharaman this week said the government will go ahead with the planned initial public offering (IPO) of LIC, even as Russian forces massing near Ukraine’s borders throw global markets into turmoil. “There is a buzz in the market and there is interest for LIC IPO. We are going ahead with it," Sitharaman said at a press conference, adding that the government is equally worried if the market situation is conducive.

 

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