Thursday, Jan 20, 2022
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LIC IPO: 20% FDI Cap Being Proposed To Ensure Better Participation From Foreign Investors

To ensure maximum participation from foreign investors in LIC IPO, the commerce and industry ministry has made some amendments in the foreign direct investment (FDI) policy.

LIC IPO: 20% FDI Cap Being Proposed To Ensure Better Participation From Foreign Investors
LIC IPO: 20% FDI Cap Being Proposed To Ensure Better Participation From Foreign Investors -

To get maximum participation in the country’s biggest-ever public offering of Life Insurance Corporation of India (LIC), the Department for Promotion of Industry and Internal Trade (DPIIT) is likely to come up with the draft red herring prospectus (DRHP) of Life Insurance Corporation of India (LIC) in January, CNBC-TV18 quoted sources.

The government is aiming to raise between Rs. 50,000 crore to Rs. 90,000 crore, considering the initial public offer (IPO) size.

The commerce and industry ministry has also made some amendments in the foreign direct investment (FDI) policy to ensure maximum participation in this IPO from other countries as well. Bloomberg reported previously that the authority is reviewing the FDI rules and regulations and is likely to make desired amendments so that investors from abroad can also take part in this IPO without any hassle. 

In general, foreign investors are not allowed to invest in equity stakes most Indian insurers, but not in LIC, as it is a special entity created by an act of Parliament. As per the current FDI policy, 74 per cent foreign investment is allowed under the automatic route in the insurance sector, although LIC is an exception.

As per the report, as of now, a 20 per cent foreign direct investment (FDI) limit has been proposed for this IPO and DPIIT is likely to bring a proposal to the cabinet soon.

Policyholders of LIC have been receiving updates on text messages regarding the IPO for quite a while now and the authority has also rolled out advertisements in newspapers. Last month, the authority has tightened the rule regarding the share sales by anchor investors.

The government has a target closer to its Rs 1.75-lakh-crore divestment for the fiscal 2021-22 and allowing foreign investors to participate in this IPO will help to achieve that. 

The government in September last year appointed 10 merchant bankers, including Goldman Sachs (India) Securities Pvt Ltd, Citigroup Global Markets India Pvt Ltd and Nomura Financial Advisory and Securities (India) Pvt Ltd to manage the mega initial public offering of the country's largest insurer LIC.

Other selected bankers include SBI Capital Market Ltd, JM Financial Ltd, Axis Capital Ltd, BofA Securities, JPMorgan India Pvt Ltd, ICICI Securities Ltd, and Kotak Mahindra Capital Co Ltd. Finance Minister Nirmala Sitharaman is also reviewing the progress herself. 

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