Cabinet allows up to 20% FDI in IPO-bound LIC

The decision in this regard was taken by the Cabinet, chaired by Prime Minister Narendra Modi

The Union Cabinet Saturday approved up to 20% foreign direct investment under automatic route in LIC ahead of its IPO, a move that will help foreign investors buy shares in the insurance behemoth.

Until now foreign investment was not permitted in LIC through FDI up to 74% is allowed in other insurers.

FDI ceiling at 20% is at par with other public sector banks and it has been kept on the automatic route in order ow in LIC

to expedite the capital raising process, a government source said.

The government is expected to sell over 31% shares or 5% of its stake in LIC and garner upto Rs 65,000 crore. Though the IPO price has yet not been disclosed by the insurer, the market expects the IPO to be in the range of Rs 2,000-2,100 per share.

Read | Policyholders will be losers in LIC IPO: Thomas Isaac

LIC IPO is likely to be the biggest in Indian history. According to the draft papers filed with the capital market regulator SEBI, LIC's embedded value has been pegged at about Rs 5.4 lakh crore as of September 30, 2021.

The LIC IPO is offer for sale (OFS) by the Government, which holds a 100% stake or over 632.49 crore shares in LIC. The face value of shares is Rs 10 per share. The IPO is likely next month. It is expected to help the government reach its disinvestment target Rs 78,000 crore for the financial year 2021-22. So far the government has been able to garner a little over Rs 12,000 crore.

The Cabinet decision comes in the midst of fears that the government may defer the LIC IPO to the next financial year (2022-23) as the financial markets were expected to remain volatile due to the Russia-Ukraine crisis.

“There is no plan to postpone LIC as of now,” said the source.

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