DPIIT on Monday notified the government’s decision to allow Foreign Direct Investment (FDI) up to 20% in LIC.
LIC IPO: The path of foreign direct investment (FDI) in the country’s largest insurance company LIC (Life Insurance Corporations of India) has now become clear.
The Department for Promotion of Industry and Internal Trade (DPIIT) on Monday notified the government’s decision to allow foreign direct investment (FDI) up to 20 per cent in LIC. With this, the government can now sell up to 20 percent stake in LIC to foreign investors through the automatic route.
The Union Cabinet had last month approved the decision of up to 20% foreign investment to ease the disinvestment process of the country’s largest insurance company. With the approval of FDI, foreign funds will be able to invest money in the IPO of the country’s largest insurance company.
Why was it needed?
According to the policy of FDI regarding the insurance sector, foreign investors can invest up to 74 percent in insurance companies under the automatic route. Although this rule does not apply to LIC because LIC is not registered under any Companies Act, but it has been established by bringing a law in Parliament, called LIC Act. Now the government has approved the proposal to change it.
Foreign investors will now be able to invest in IPO
As per SEBI rules, Foreign Portfolio Investment (FPI) and Foreign Direct Investment are allowed under Public Offer. But, since there is no provision for foreign investment in the LIC Act, foreign funds are not able to invest in its IPO. After making changes in the FDI policy of the cabinet, now foreign funds will be able to invest money in LIC’s IPO.
Why only 20 percent limit?
The FDI limit in public sector banks is 20 percent. Therefore, a limit of 20 percent has been kept for LIC also. Sources said that foreign investors can show good interest in LIC’s IPO with the permission of FDI.
In July last year, the cabinet approved the proposal of LIC’s IPO. Now the preparation for this IPO has been completed. It is expected that this IPO will hit the market in March. The government can raise 60 to 90 thousand crore rupees from this issue.
