The Life Insurance Corporation (LIC) filed draft papers with SEBI for 5% state sale by the government for an estimated Rs 63,000 crore on February 13.

The Union Cabinet on Saturday, February 26, permitted up to 20% foreign direct investment (FDI) under automatic route in IPO-bound LIC with an aim to aid disinvestment of the country’s largest insurer, PTI reported quoting its sources. The decision in this regard was taken by the Cabinet, chaired by Prime Minister Narendra Modi.

The Centre has approved the listing of equity shares of Life Insurance Corporation of India on the bourses through an initial public offering (IPO) by part-sale of its stake in the insurance company.

Foreign investors may be interested in participating in the mega IPO. However, the existing foreign direct investment policy did not prescribe any specific provision for foreign direct investment in LIC, which is a statutory corporation established under the LIC Act, 1956.

Since as per the current FDI policy, the foreign inflows ceiling for public sector banks is 20% under the government approval route, it was decided to allow foreign investment of up to 20% for LIC and other corporate bodies.

“Further, in order to expedite the capital raising process, such FDI has been kept under the automatic route, as in the case of the rest of the insurance sector,” one of the sources said. The IDI inflow with supplement domestic capital, skill development for accelerated economic growth and development across sectors.

LIC filed draft papers with SEBI for 5% state sale by the government for an estimated Rs 63,000 crore on February 13. The IPO is likely to hit the capital market in March. Employees and LIC policyholders, including PMJJBY policyholders, would get a discount over the floor price.

According to the DRHP, LIC’s embedded value, which is a measure of the consolidated shareholders’ value in an insurance company, has been pegged at about Rs 5.4 lakh crore as of 30 September 2021, by international actuarial firm Milliman Advisors.

While the DRHP does not disclose the market valuation of LIC, as per industry standards it would be around three times the embedded value or about Rs 16 lakh crore.

The country’s largest insurer’s public issue would be the biggest IPO in the history of the Indian stock market. Once listed, the market valuation of LIC would be comparable to top companies like TCS and RIL.

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