FDI exemption up to 20% through automatic route in LIC, notification of amendment in FEMA rules issued, a new paragraph has been added to the existing policy.
FEMA Rules Amended For 20 per cent FDI in LIC : The way has been cleared for 20 percent foreign direct investment (FDI) in the country’s largest insurance company LIC. For this, the Government of India has made important changes in the rules of the Foreign Exchange Management Act (FEMA). After this change, it will be possible to sell up to 20 percent stake of LIC to large foreign investors.
In this regard, the government has also issued a gazette notification, which has been called Foreign Exchange Management (Non-Debt Instruments) Amendment Rules 2022. Through this notification, a new paragraph has been added to the existing policy, through which foreign direct investment (FDI) up to 20 percent has been allowed in LIC through the automatic route. The maximum limit of FDI in LIC has been kept at 20 percent because under the existing rules, the maximum limit for foreign investment in public sector banks is also 20 percent.
Changes in FEMA rules pave way for FDI in LIC
Earlier on March 14, the Department for Promotion of Industry and Internal Trade (DPIIT) also made important changes in the FDI policy to ease investment in LIC’s mega IPO. The purpose of these policy changes made after the approval in the cabinet was to allow large foreign portfolio investors to subscribe for LIC shares. But in order to implement the amendments made by DPIIT, it was necessary to issue notification of changes in FEMA rules.
LIC is about to bring the country’s largest IPO
The Government of India is soon going to bring LIC’s Mega IPO, through which there is a plan to sell 5 percent stake of the company. LIC had submitted the draft Red Herring Prospectus (DRHP) for this IPO to the market regulator SEBI (SEBI) in February 2022 itself, which has also been approved in March. But now the company is going to apply for some changes in its IPO proposal. Now it has to be seen what changes the government is going to make in this proposal. Will the size of the IPO be increased after the provision of foreign investment exemption of up to 20 percent in the rules or will the government use this change in the rules in future.
Biggest IPO in the country’s history
Due to the huge size of LIC, the value of this 5 per cent stake in the stock market is also being estimated to be around Rs 63,000 crore. Accordingly, this will be the biggest IPO ever in the history of the country. Earlier, the biggest IPO in the country so far has been of Paytm. The size of this IPO, which came in 2021, was Rs 18,300 crore.
LIC’s valuation estimated to be Rs 16 lakh crore
According to the draft paper submitted by LIC, international firm Milliman Advisors had estimated the embedded value of LIC at Rs 5.4 lakh crore as on 30 September 2021. Although no estimate has been given for the market valuation of Lily in DRHP, but by industry standards, it is estimated to be around three times the embedded value, ie, around Rs 16 lakh crore. According to this valuation, LIC will join the ranks of the country’s largest companies like Reliance Industries (RIL) and TCS after listing. (Input: PTI)