E-Paper
Govt may need not amend law to allow foreign participation in LIC IPO: Report
People familiar with the developments pointed out that foreign investors will be allowed to participate in the IPO sale according to the listing norms of the Securities and Exchange Board of India (SEBI) and the extant sectoral FDI guidelines.
The Centre may not need to bring any amendment to legislation in order to allow foreign investors’ participation in the proposed initial share sale of insurance major Life Insurance Corporation of India (LIC), people familiar with the developments told news agency PTI.
Earlier, reports from new agencies surfaced that the government was mulling to bring new legislation enabling foreign investors to buy a stake in LIC’s IPO sale via automatic route and bypassing the need for government approval.
People familiar with the developments pointed out that foreign investors will be allowed to participate in the IPO sale according to the listing norms of the Securities and Exchange Board of India (SEBI) and the extant sectoral FDI guidelines.
Foreign investment in the insurance sector is also regulated by the Insurance Act, IRDA Act and the rules made under them and which are implemented by the Insurance Regulatory and Development Authority of India (IRDAI). The government and the Reserve Bank of India also regulate foreign investment in the insurance sector.
The IPO of the LIC would also be guided by the capital regulations of the regulatory body. People familiar with the developments, however, said that the government may come out with amendments for the relevant rules in case any clarification is required.
The government earlier this year made amendments to the Life Insurance Corporation Act, 1956 to facilitate the listing of LIC.
According to the amendment, the central government will hold 75% in the LIC for the first five years after the IPO and then it will subsequently hold at least 51% at all times after five years of its listing.
The authorised share capital of the LIC shall be ₹25,000 crore divided into 2,500 crore shares of ₹10 each, as per the amended legislation. 10% of the LIC IPO issue size will be reserved for policyholders.
Union minister of finance Nirmala Sitharaman said the IPO of the LIC would be launched in the current financial year in her Union Budget speech. The government currently owns a 100% stake in LIC.
LIC, once listed, has the potential to become one of the biggest domestic companies by market capitalization with an estimated valuation of ₹8-10 lakh crore.
Manager of government's equity in state-owned companies, the Department of Investment and Public Asset Management (DIPAM), selected actuarial firm Milliman Advisors earlier to ascertain the embedded value of LIC for meeting the disinvestment target set by the government.
It appointed 10 merchant bankers, including Goldman Sachs (India) Securities, Citigroup Global Markets India and Nomura Financial Advisory and Securities (India), to manage the mega initial public offering of LIC.
The other bankers selected by DIPAM include SBI Capital Markets, JM Financial, Axis Capital, BofA Securities, JP Morgan India, ICICI Securities and Kotak Mahindra Capital Co Ltd.
The Cabinet Committee on Economic Affairs in July cleared the initial public offering proposal of LIC. The listing of LIC will be crucial for the government in meeting its disinvestment target of ₹1.75 lakh crore for 2021-22 (April-March).
