FDI will now be allowed in LIC. The Union Cabinet on Saturday allowed foreign direct investment (FDI) of up to 20 percent in LIC, which has come up with an IPO for the purpose of disinvestment of the country’s largest insurance company. The cabinet chaired by Prime Minister Narendra Modi took a decision in this regard. The government has approved listing of LIC’s shares in the stock market through IPO.
This was done because foreign investors may be willing to invest in mega IPOs. However, the extant FDI policy does not have any specific provision for foreign investment in LIC, which is a statutory corporation established under the LIC Act, 1956. As per the current FDI policy, the foreign fund limit for public sector banks is 20 per cent after government approval, hence it has been decided to allow foreign investment up to 20 per cent for LIC and other such corporate bodies.
To expedite the process of raising capital, such FDI has been kept under auto mode as is the case with the rest of the insurance sector, a source said. The increased FDI will increase domestic capital, help in technology transfer, skill development for accelerated economic growth and help in all sectors.
LIC had filed a draft letter with capital markets regulator SEBI on February 13, setting the stage for the country’s biggest ever public offering. In this, there is an offer for sale of 5 percent stake for Rs 63,000 crore. The IPO of over 31.6 crore shares or 5 per cent government stake is likely to come up for purchase in March. Insurance company employees and policyholders will get a discount on the floor price. (with pti input)