Government Allows 20 percent FDI in LIC

As per sources, the government has decided to allow 20 percent foreign direct investment (FDI) under the automatic route in LIC (Life Insurance Corporation of India), which will soon see an IPO in line with the government’s plan for disinvestment of the nation’s largest insurer.

The decision was taken by the center headed by Prime Minister Narendra Modi.

LIC is seeking to dilute a stake of 5 percent to raise close to $8 billion in India’s largest initial public offering (IPO).

As per SEBI regulations, FDI and FPI are both permitted under public offer. But since the LIC Act has no provision for foreign investments, the FDI policy was amended to bring the LIC IPO in line with the SEBI regulations concerning foreign investor participation.

LIC filed its draft papers with SEBI on February 13 for the stake sale of 5 percent by the central government for an estimated value of Rs. 63,000 crores.

Although the market valuation of LIC has not been disclosed, it is estimated close to Rs. 16 lakh crores, which is three times the embedded value as per industry standards.

The LIC IPO would be the biggest IPO in the history of the Indian stock market. The current highest public offerings are that of Paytm (raising Rs. 18,300 crores in 2021), Coal India (raising Rs. 15,500 crores in 2010) and Reliance Power (raising Rs. 11,700 crores in 2008).

The IPO of more than 31.6 crore shares will likely hit markets in March. LIC’s employees and policyholders will be able to get a discount on the offer price. After its listing, LIC’s market valuation would be around that of giants like RIL and TCS.

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