Indian Government to allow Foreign Direct Investment (FDI) for LIC IPO

indian government to allow foreign direct investment fdi for lic ipo

Allowing FDI in LIC would permit strategic investors such as massive pension funds or insurance firms to participate in the IPO.

Amid the recent IPO storm, which saw a never-seen interest from retail as well as institutional investors, the Indian Stock exchange is now preparing for one of its largest IPOs. Although 74 percent FDI is permitted in the insurance sector, it doesn’t apply to LIC, as the company is a special entity formed through legislation in the Parliament.

But this is going to change soon as the Indian Government is planning to permit FDI in the Life Insurance Corporation of India (LIC), which is ready to go for a massive IPO listing. The listing could value LIC at as much as $261 billion, based on its assets under management and using private-sector insurers.

According to the Reserve Bank of India, FDI means purchasing a stake that’s 10 percent or larger by an individual or entity based abroad.Many international bankers, including Goldman Sachs, JPMorgan, BofA Securities, have shown interest in managing the much-awaited offering, and 16 merchant bankers are in the race to manage the LIC IPO. They will make a presentation before the Department of Investment and Public Asset Management (DIPAM) over the next two days.

Allowing FDI in LIC would permit so-called strategic investors such as massive pension funds or insurance firms to participate in the initial public offering. And also, it will pave the way for other companies to follow.