The central government is weighing the possibility of foreign direct investment (FDI) in the Life Insurance Corporation (LIC) of India ahead of the company’s mega public offering. The move would enable overseas investors to buy stake in the nation’s largest insurer ahead of its IPO.
“Discussions on structuring the increase in foreign shareholding and the ceiling are ongoing and a decision is yet to be taken,” an official said, reported Business Standard.
While regulations for FDI allow an investment of up to 74 percent in insurance companies, the rules for public sector companies come with their regulations. Foreign investors would need the nod of the Insurance Regulatory and Development Authority of India (IRDAI) if they are looking to pick up a stake in the company.
Permitting FDIs in the insurance company would allow foreign strategic investors to participate in the IPO, which is expected to be the country’s largest one ever. LIC is wholly owned by the government of India, which is looking to make up shortfalls in its budget by selling off stakes in the insurer. While the papers have not yet been filed, the valuation for LIC is expected to be upwards of $250 billion, making it by far the largest IPO that India has seen.
The LIC IPO is part of the comprehensive plan of the government to make up its Budget deficit by selling its stakes or privatising public sector companies and assets. Another step in that direction is the recently-unveiled National Monetisation Pipeline, which will bring in around $80 billion in revenue.
The LIC IPO is still in its early stages of preparation, and the decision regarding the FDI has not been finalised yet. Regardless of the decision, it is expected that a cap will be put in place to regulate the level of foreign investment in the insurance company. Investors like large pension funds and insurance funds are expected to buy stake in LIC at large levels.
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A team of 10 book running lead managers is going to be appointed by the government to lead the IPO. Sixteen banks and institutions are currently in the running to underwrite the IPO. BNP Paribas, Citigroup Global Markets India, BofA Securities, Goldman Sachs (India) Securities, HSBC Securities and Capital Markets (India), JP Morgan India, Nomura Financial Advisory and Securities (India), Axis Capital, DAM Capital Advisors, HDFC Bank, ICICI Securities, IIFL Securities, JM Financial, Kotak Mahindra Capital, SBI Capital Market, and YES Securities India have all thrown their names in the hat.
(Edited by : Shoma Bhattacharjee)
First Published: Aug 25, 2021 7:13 PM IST
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