In order to help in facilitating the initial public offering of the state-owned insurer, the union Cabinet is expected to take up a proposal next week.
The move is to allow foreign investment in Life Insurance Corporation.
Changes In LIC Act
According to a senior government official, the final proposal would be moved for Cabinet’s consideration soon.
Further adding that the approval is expected by mid-February.
So far, India allows foreign direct investment (FDI) up to 74% in the insurance sector.
Interestingly it does not apply to LIC as the insurer is governed by the LIC Act.
It seems that the government may allow up to 20% foreign investment in the insurer considering its plans to list by the end of this fiscal year.
On this subject, the official said, “We don’t expect much delays (for getting the approval) because everyone is on board,”.
Basically, the aim is to ensure that there are no legal issues and the clearances for the IPO from both insurance and market regulators are fast tracked, according to the officials.
Further, the official added, the changes have been agreed to by all stakeholders including the ministries of corporate affairs and finance. “Hopefully, the Cabinet approval would come by mid-February.”
At the start of this month, Industry secretary, Anurag Jain informed that the government was making changes to the FDI policy to facilitate disinvestment of the country’s largest insurer.
He added, “So, we would be coming out with a revised FDI policy which will facilitate LIC disinvestment,”.
LIC Public Offering
Currently, the LIC Act does not mention foreign investment. Apart from that, only the central government is allowed to hold more than a 5% stake in the company.
During July, last year, the Cabinet had approved the initial public offering of LIC, after that the stake sale is being planned in the ongoing quarter.
According to the official, the minor issues such as the definition of shares-based employee benefit schemes, or ESOPs, have been aligned with the Companies Act to avoid any contradictions with other laws.
A senior LIC official said, “Once the government makes the amendments, we will reach out to the insurance regulator, the Insurance Regulatory and Development Authority of India, seeking the requisite clearances,”.
Further adding that the firm will file the draft red herring prospectus (DRHP) only after getting the regulator’s approval.
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