LIC listing: India may allow 20% FDI in state-run insurer

Centre considering a plan to amend FDI rules so that investors can pick up the stake without the government’s approval under the so-called automatic route

The government is seeking a valuation of between ₹8 trillion and ₹10 trillion ($134 billion) for LIC

The Government of India is considering allowing foreign direct investment (FDI) in Life Insurance Corporation (LIC) to enable foreign investors to buy stakes in the insurer.

The GoI is considering a proposal for foreign investors to own as much as 20 per cent in LIC, which would enable them to participate in the nation’s biggest initial public offering early next year.

The Centre is considering a plan to amend FDI rules so that investors can pick up the stake without the government’s approval under the so-called automatic route, Bloomberg quoted a source as saying. Officials are due to discuss the proposal as early as Wednesday afternoon in New Delhi, the report said.

Also read: India has ₹90,000 cr lying idle in PF, LIC, bank accounts; what happens to it?

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The Centre is relying on money from the state-run insurer’s IPO to meet its budget deficit target for the financial year through March 2022. 

FDI of as much as 74 per cent is permitted in most Indian insurers, but the rules don’t apply to LIC because it is a special entity created by an act of parliament.

The Reserve Bank of India defines FDI as purchase of a stake in a listed company that’s 10 per cent or larger by an individual or entity based abroad, or any foreign investment in an unlisted firm.

Also read: Hint of changing tastes: LIC likely to ‘order’ an IPO on Zomato?

The government is seeking a valuation of between 8 trillion and 10 trillion ($134 billion) for LIC, and is considering a stake sale of 5 per cent to 10 per cent, which could raise between 400 billion and 1 trillion, Bloomberg had reported earlier.

LIC is expected to list between January and March 2022.

LIC came into being in 1956 through an act of Parliament with 5 crore capital from the government.

The government has already issued a notification giving effect to the 27 amendments to LIC Act, 1956, which was passed in the Budget session along with the Finance Bill. The amendments paved the way for the listing of LIC and bringing it under the provisions of the Companies Act and SEBI rules.

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