To facilitate disinvestment of the country’s largest insurer, the commerce and industry ministry has introduced some changes in the foreign direct investment (FDI) policy
The Department for Promotion of Industry and Internal Trade (DPIIT) is working to bring the draft red herring prospectus (DRHP) of Life Insurance Corporation of India (LIC) this month, CNBC-TV18 reported on January 14 quoting sources.
According to the report, 20 percent foreign direct investment (FDI) limit is being proposed for the country’s biggest ever public offer and DPIIT will soon bring a proposal to the cabinet, the report said.
The DRHP will provide the embedded value of LIC as well as the number of shares on offer.
To facilitate disinvestment of the country’s largest insurer, the commerce and industry ministry has introduced some changes in the foreign direct investment (FDI) policy. Authorities are reviewing and amending rules on FDI to make it easier to lure investors from abroad, Bloomberg reported earlier this week. Equity stakes among foreigners are allowed for most Indian insurers, but not in LIC, which is a special entity created by an act of Parliament.
“The clearance for foreign stakes in the mega offering would not just permit global funds to participate, but also allow them to buy more after the exchange listing. Regulators made other moves late last month, including tightening rules governing share sales by anchor investors.”
The success of the public issue is crucial for the government to inch closer to its Rs 1.75-lakh-crore divestment target for the fiscal 2021-22. So far, only Rs 9,330 crore has been mopped up through PSU stake sale.
Reportedly, India is pushing for a valuation of about Rs 15 lakh crore ($203 billion) for the insurer, while a completed valuation report is still in the works. The embedded value of Life Insurance Corp is likely to be more than Rs 4 lakh crore, and its market value could be about four times that amount. Once the final report is in, the valuation the government is seeking could change.
“If investors agree with those calculations proposed by the government, LIC would join the league of India’s biggest companies – Reliance Industries and Tata Consultancy Services – that enjoy a market capitalisation of Rs 17 lakh crore rupees and Rs 14.3 lakh crore, respectively,” the report said.
