Government Plans up to 20% Foreign Investment in LIC IPO

India is zeroing down on a proposal to let foreigner investors participate in the upcoming Life Insurance Corporation IPO. However, the government will limit foreign investments to a maximum of 20%, as per sources.

A plan to amend the rules put forward by FDI is currently under discussion. This amendment will let investors purchase shares without the Indian government’s approval.

What Led to Life Insurance Corporation IPO?

The pandemic has hit several financial sectors over the past year, including the government’s tax collections. As a result, the Government of India is depending on Life Insurance Corporation IPO to make up for the March 2022 budget deficit.

According to the rules, foreign direct investment of up to 74% is permitted in Indian insurance entities. However, Life Insurance Corporation is a special Indian entity created by an act of the Parliament of India. So, the same rules do not apply to Life Insurance Corporation.

Besides the Reserve Bank of India and the Indian government, IRDAI also regulates foreign participation and investments in the Indian insurance sector. In addition, IRDAI will also regulate the Life Insurance Corporation IPO.

Earlier in 2021, the Government of India amended the Life Insurance Corporation Act, 1956, to bring about LIC’s listing.

According to the amendment, the Indian government will own a minimum of 75% stake in Life Insurance Corporation throughout the first five years from the IPO. After five years, the government needs to hold a minimum of 51% stake at all times.

What to Expect from Life Insurance Corporation IPO?

As per the amendment, Life Insurance Corporation’s authorised capital will be Rs. 25,000 crores. There will be 2,500 crore shares, and the price of each share will be Rs. 10. In addition, policyholders will be allotted up to 10% of the Life Insurance Corporation IPO issue volume.

The Government of India is expecting a valuation of Rs. 8 lakh crores to Rs. 10 lakh crores for Life Insurance Corporation after its listing. LIC will become one of the largest domestic companies in terms of market capitalisation once listed.

Bottom Line

In light of these events, foreign participation as per SEBI’s listing norms and existing FDI rules will be allowed in Life Insurance Corporation IPO.

As per sources, government officials plan to meet and further discuss this in New Delhi at the earliest.

For more updates about IPOs, stock market and investments, make sure to take a look at the Angel One blogs.

Frequently Asked Questions

1. What is Life Insurance Corporation’s current asset base?

As of writing, the asset base of Life Insurance Corporation is over Rs. 38 lakh crores.

2. What is the date for Life Insurance Corporation IPO?

As per sources, the Indian government plans to complete LIC’s IPO by March 2022.

3. Which bankers are likely to manage LIC IPO?

The bankers selected for LIC IPO are Goldman Sachs (India) Securities, Citigroup Global Markets India, Nomura Financial Advisory and Securities (India), SBI Capital Markets, Axis Capital, JM Financial, BofA Securities, Kotak Mahindra Capital Co Ltd., ICICI Securities and J P Morgan India.