Govt may permit foreign direct investment in LIC ahead of mega IPO

The government is considering allowing foreign direct investment (FDI) in Life Insurance Corporation of India (LIC) to enable overseas investors to buy stakes in the insurer.

“Discussions on structuring the increase in foreign shareholding and the ceiling are ongoing and a decision is yet to be taken,” an official said.

FDI of up to 74 per cent is permitted in insurance companies, but LIC and other public sector insurance companies come under their own statutes. The current norms mandate foreign investors to seek permission from the Insurance Regulatory and Development Authority of India (IRDAI) if they pick up a stake larger than 5 per cent in an insurance company, said Rajesh Dalmia, partner at EY India.

Allowing foreign investors to invest in LIC would aid its listing, expected to be the largest initial public offering in India. Although the embedded value of LIC is yet to be derived, the issue size could be around Rs 1 trillion.

The listing would involve part-sale of the government’s stake in the insurer and raising fresh equity share capital. A part of the public offering may be reserved for employees and policyholders of LIC.

The government is looking to appoint up to 10 book running lead managers with experience in public offerings and will form a team. As many as 16 merchant banks — BNP Paribas, Citigroup Global Markets India, BofA Securities, Goldman Sachs (India) Securities, HSBC Securities and Capital Markets (India), JP Morgan India, Nomura Financial Advisory and Securities (India), Axis Capital, DAM Capital Advisors, HDFC Bank, ICICI Securities, IIFL Securities, JM Financial, Kotak Mahindra Capital, SBI Capital Market, and YES Securities India — are in the fray to assist the LIC IPO.