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New Delhi: According to a person familiar with the matter, India is considering allowing foreign direct investment in Life Insurance Corporation, which could enable a single foreign investor to buy a large stake in a firm that is headed for a mega-IPO. .
Any strategic investment will be subject to a cap, although it is not clear at what level that will be set, the person said, not knowing as to be privy to the deliberations. Participants in a meeting earlier this month referred to the 20% FDI limit on state-run banks, the person said.
Allowing FDI in LIC will allow so-called strategic investors such as large-scale pension funds or insurance firms to participate in the initial public offering, India’s biggest ever. The Reserve Bank of India defines FDI as the purchase of a stake of 10% or more by a person or entity located abroad.
Bankers wishing to arrange for LIC’s IPO are to make a presentation to the government on Thursday. Prime Minister Narendra Modi’s administration – which owns 100% of LIC – is looking at sales to help reduce its budget gap to 6.8% of GDP by March 2022.
Analysts at Jefferies India wrote in a February note that the listing could value LIC at $261 billion, based on its assets under management and using private sector insurers as its benchmark.
While FDI up to 74 per cent is allowed in most Indian insurance companies, the rules do not apply to LIC as it is a special entity created by an Act of Parliament, the person said, adding that the discussion about FDI is in an early stage and No final decision has been taken yet. A finance ministry spokesperson could not be immediately reached for comment.
BNP Paribas SA, Citigroup Inc. and Goldman Sachs Group Inc. It is among the seven foreign banks that are competing to manage an IPO. The nine Indian firms include HDFC Bank Ltd and Axis Capital.bloomberg
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