India’s cabinet approved on Saturday a policy amendment allowing foreign direct investment of as much as 20% in Life Insurance Corp of India (LIC), a government source said, a change aimed toward easing the listing of the state-run insurer.
India’s biggest insurance company plans to drift a stake of 5% to lift about $8 billion next month for the south Asian nation’s largest initial public offering (IPO) by far.
The amendment would allow foreign direct investors to purchase as much as 20% of LIC’s shares through an automatic route, said the federal government source, who spoke on condition of anonymity after the cupboard meeting.
Under current rules, foreign investment is just not allowed within the LIC, governed by the special parliament act, while 74% foreign direct investment is allowed in other private insurance firms.
The amendment would allow the federal government to lift the foreign direct investment limit within the LIC as much as 20%, on par with the rule for state-run banks, the federal government source said.
The cupboard decision comes amid growing fears amongst some investors that the federal government could defer public listing of the LIC resulting from increasing volatility out there after Russia’s invasion of Ukraine.
Government officials, have nonetheless, said that there was no plan to defer the listing of the insurance company – critical for plans to lift funds for budgeted spending.
Within the IPO, the firm may even earmark a certain percentage of shares for policyholders, not exceeding 10% of the offer size, while the portion reserved for workers is not going to be greater than 5% of post-offer equity share capital, in response to the IPO filing. LIC employed 114,498 people as of end-March, 2021.
LIC, which was formed six many years ago when India’s insurance sector was nationalized, straddles the business within the country, with greater than 280 million policies and over 60% of the insurance segment.