JOIN USCabinet likely to review FDI proposal for LIC next week: Report
The Cabinet may discuss a proposal to allow foreign investment in IPO-bound state insurer Life Insurance Corporation as soon as next week and it could get a green light by mid-February, sources told The Economic Times.
“We don’t expect much delays (for getting the approval) because everyone is on board,” the source told ET, adding that the government wants to steer clear of legal issues and clearances for the much-anticipated IPO, planned at the end of the current fiscal year.
The government is revising the Foreign Direct Investment (FDI) policy to ease the disinvestment of the company. FDI of up to 74 per cent is allowed in India’s insurance sector but LIC is exempted from this condition as it is governed by the LIC Act.
The LIC Act does not mention foreign investment but states that the government cannot hold more than a 5 per cent stake in the company.
LIC has a majority share of the life insurance market in India and the government anticipates that proceeds from the IPO will help bridge a deficit gap this fiscal year. The listing will also bring more transparency into the working of the state-run company.
A government official told Reuters that the government's divestment department is solely focused on the giant state-backed insurer's IPO, from which it hopes to gain as much as Rs 89,943 crore, and had also put aside other privatisation plans for this fiscal year.
Since LIC is a household name in India, bankers working on the IPO say they are confident of robust demand from retail investors, but the strength of institutional demand will be key.
Much of LIC's financials, including its 'embedded value' - a measure of future cash flow for life insurance companies and the key financial gauge for insurers - have yet to be disclosed.
(With agency inputs)
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