According to insiders, the government is considering authorizing foreign direct investment (FDI) in the country’s largest insurer, LIC; to assist overseas investors to participate in the company’s anticipated mammoth IPO.
The Department of Financial Services and the Department of Investment and Public Asset Management are debating the plan (DIPAM).
Discussions about the concept have been ongoing for several weeks. According to an insider, it would also be subject to inter-ministerial consultations and Cabinet approval. 74% of foreign investment is allowed in the insurance sector under the existing FDI policy. As for the Life Insurance Corporation of India (LIC), which is operated under its Act, this law does not apply to them further.
For public offerings, both FPI and FDI are allowed, according to SEBI regulations there is also a requirement to reconcile the proposed LIC IPO with SEBI standards governing foreign investor involvement because the LIC Act does not include any provisions for foreign investing.
In July, the Cabinet had approved LIC’s initial public offering. Before the IPO, the DIPAM had recruited actuarial company Milliman Advisors LLP India to examine the LIC’s inherent value.
The LIC IPO is expected to be released after the current fiscal year. Policyholders would be entitled to up to 10% of the issue size. To prepare for the potential IPO, the government has already amended the LIC Act. As pre-IPO transaction consultants, Deloitte and SBI Caps have been appointed.
Sixteen merchant bankers are vying for the opportunity to oversee the big IPO. During the week, these lenders will make a presentation to DIPAM.
BNP Paribas, Citigroup Global Markets India, and DSP Merrill Lynch Ltd. (previously known as BofA Securities) are among the seven major financial institutions slated to offer to brief. For the administration to reach its privatization target, the listing of LIC will be key. As a result of minority stock sales and privatizations, the government hopes to raise Rs 1.75 lakh crore in the current year (Fiscal year).
In addition, the administration plans to sell its holdings in public sector banks and commercial organisations for Rs. 1.75 lakh crore. Seventy-five billion rupees would come from the CPSE’s retrench.