The Department for Promotion of Industry and Internal Trade (DPIIT) is working on bringing out the draft Red Hearing Prospectus (DRHP) of Life Insurance Corporation (LIC) this month. CNBC TV 18 has given this information on January 14, quoting sources.
20 FDI limit may be proposed
According to the report, 20 percent foreign direct investment (FDI) limit is being proposed in the country’s largest public offer and DPIIT will soon put a proposal related to this in the cabinet. DRHP will specify the value of LIC as well as the number of shares to be offered.
Government reviewing FDI rules
To ease the disinvestment of the country’s largest insurance company, the commerce and industry ministry has introduced some changes in the Foreign Direct Investment (FDI) policy. Bloomberg reported this week that authorities were reviewing and revising FDI regulations to woo foreign investors. Foreigners are allowed to take equity stake in most Indian insurance companies, but this is not the case with LIC. LIC is a special entity created under an Act of Parliament.
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Foreign investors will be able to take stake even after listing
“The approval for foreign stake in this mega offer will not be limited to the participating global funds but will also allow them to buy a higher stake post listing. Regulators have taken several other steps in the last month including stricter rules governing share sales by anchor investors.”
IPO is important for disinvestment target
The success of the public issue is crucial for the government to achieve its 2021-22 disinvestment target of Rs 1.75 lakh crore. So far, only Rs 9,330 crore has been raised through PSU stake sale.
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India is understood to be pushing for a valuation of Rs 15 lakh crore ($203 billion) for the insurer, though work on the full valuation report is still underway. The installed value of LIC is estimated to be more than Rs 4 lakh crore and its market value could be four times this amount. Once the final report is out, the valuation may change as compared to the government’s expectation.
LIC may come in the list of biggest companies
The report says, “If investors agree with this calculation proposed by the government, LIC could join the ranks of India’s biggest companies – Reliance Industries and Tata Consultancy – with valuations of Rs 17 lakh crore and Rs 14.3 lakh crore respectively. “
Disclaimer: Moneycontrol is part of Network18 Group. Network 18 is controlled by Independent Media Trust, whose sole beneficiary is Reliance Industries.