Lagatar24 Desk
New Delhi, April 17: The central government has changed the restrictions of the Foreign Exchange Management Act (FEMA), allowing up to 20% foreign direct investment in the insurance giant LIC.
The government intends to sell a portion of its stake in LIC through an Initial Public Offering (IPO). The LIC submitted the Draft Red Herring Prospectus (DRHP) for the IPO with the markets regulator SEBI in February.
The SEBI approved the draught papers last month, and the insurer is preparing to submit a request for proposal with revisions.
Following Cabinet approval, the Department for Promotion of Industry and Internal Trade (DPIIT) changed its Foreign Direct Investment (FDI) policy on March 14 to make it easier for foreign investors to invest in LIC ahead of the mammoth public offering.
FEMA notification was required to put into effect the measures DPIIT announced in a press release, such as modifications to the FDI policy that will allow major foreign portfolio investors to subscribe to LIC shares.
“These rules may be called the Foreign Exchange Management (Non-debt Instruments) (Amendment) Rules, 2022,” said a gazette notification issued recently.
The notification adds a paragraph to the current policy that allows up to 20% FDI in LIC via the automatic route.
Due to the fact that the foreign inflows ceiling for public sector banks is 20% under the current FDI policy, it has been agreed to allow foreign investment of up to 20% in LIC and other similar corporate entities.
The SEBI has cleared the draught prospectus for the government’s sale of a 5% interest for an estimated Rs 63,000 crore, paving the way for the country’s largest-ever public offering.
The LIC public offering is projected to be the largest in Indian stock market history. LIC’s market value will be comparable to leading firms like RIL and TCS once it gets listed.
Paytm’s IPO in 2021 raised the most money ever at Rs 18,300 crore, followed by Coal India’s IPO in 2010 at around Rs 15,500 crore and Reliance Power’s IPO in 2008 at Rs 11,700 crore.
