The Department for Promotion of Industry and Internal Trade (DPIIT) will soon approach the Union Cabinet to seek its approval on changes in the Foreign Direct Investment (FDI) policy to facilitate disinvestment of the country’s largest insurer. LICa top government official said on Wednesday.
DPIIT secretary Anurag Jain said that inter-ministerial consultations on the matter are in the final stages.
“Hopefully it should happen very soon… all the comments coming (from different departments) will support (the proposal),” he told reporters.
He also expressed hope that the cabinet would consider the proposal soon.
After taking opinion from the Finance Ministry, DPIIT is making changes in the FDI policy to facilitate disinvestment of LIC.
As per the current FDI policy, 74% foreign investment is allowed in the insurance sector under the automatic route. However, these rules do not apply to Life Insurance Corporation of India (LIC), which is administered through a separate LIC Act.
As per SEBI regulations, both FPI and FDI are allowed under public offering. However, since there is no provision for foreign investment in the LIC Act, the proposed LIC IPO needs to align with SEBI norms with regard to foreign investor participation.
The DIPAM secretary said the government may file draft documents for LIC’s mega initial public offering with market regulator SEBI by next week, while a part of the issue will be reserved for anchor investors.
In an interview with PTI, Tuhin Kanta Pandey said that the approval of the insurance regulator is awaited, after which the draft prospectus, details of the size of the share sale, will be filed.
He said that after the approval of SEBI, this issue may hit the market in March. LIC’s listing is crucial to meet government’s low revenue projections 78,000 crore for the current financial year.
Presenting the budget of 2022, Finance Minister Nirmala Sitharaman said that the public issue of LIC is expected to come soon.
Pandey said the underlying value of Life Insurance Corporation (LIC) has arrived and it will now have to seek approval from insurance regulator IRDAI.
Up to 10% of the LIC IPO issue size will be reserved for policyholders.
Actuarial firm Milliman Advisors LLP India has worked on LIC’s embedded value, while Deloitte and SBI Caps have been appointed pre-IPO transaction advisors. Under the embedded value method, the present value of future profits of insurance companies is also included in their current net asset value (NAV).
The government has appointed 10 merchant bankers including Goldman Sachs (India) Securities Pvt Ltd, Citigroup Global Markets India Pvt Ltd and Nomura Financial Advisory and Securities (India) Pvt Ltd to manage the mega IPO of the country’s largest insurer.
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