The Centre is considering to permit foreign direct investment (FDI) in the Life Insurance Corporation of India (LIC), which is headed towards a massive initial public offering (IPO), a report said on August 24.
The move, which is being contemplated over by the government, may allow a single overseas investor to buy a large stake in the state-run insurer, which has a market share of around 66 percent.
A person privy to the development, who told Bloomberg that the government may allow FDI in LIC, also noted that any strategic investment would be subject to a cap. However, it was not clear at what level the cap would be set, the source added.
Although 74 percent FDI is permitted in the insurance sector, the norm does not apply to LIC so far as the company is a special entity formed through legislation passed in the Parliament, the person was reported as saying.
The report, which may trigger a sharp response from the employees' body of LIC, has not drawn a response from the Finance Ministry yet. Moneycontrol could not independently verify the claims.
The report comes a day after it was stated that as many as 16 merchant bankers are in the race to manage the LIC IPO — touted to be the biggest share sale in the country's history. These bankers will be making a presentation before the Department of Investment and Public Asset Management (DIPAM) spread over two days — August 24 and 25.
The Cabinet Committee on Economic Affairs had last month cleared the initial public offering proposal of LIC. The ministerial panel known as the Alternative Mechanism on Strategic Disinvestment will now decide on the quantum of stake to be divested by the government.
"The potential size of the IPO is expected to be far larger than any precedent in Indian markets," the department had said.
The government had earlier appointed actuarial firm Milliman Advisors LLP India to assess the embedded value of LIC ahead of the initial public offering. Deloitte and SBI Caps have been appointed as pre-IPO transaction advisors.
The listing of LIC will be crucial for the government in meeting its disinvestment target of Rs 1.75 lakh crore for 2021-22 (April-March). So far this fiscal, Rs 8,368 crore has been mopped up through minority stake sales in PSU and the sale of SUUTI stake in Axis Bank.
With PTI inputs.