LIC IPO: Ahead of its biggest IPO, the Union Cabinet is likely to approve the proposal to allow foreign direct investment (FDI) in Life Insurance Corporation of India (LIC) today. The move will facilitate foreign funds to participate in the upcoming IPO of the state-owned insurance behemoth.
LIC has already filed a draft red herring prospectus with the Securities and Exchange Board of India (Sebi) and the government expects the listing to be completed by March.
With LIC IPO fever gripping the country, there are many investors who want to participate in this frenzy. Here’s how India is preparing for its biggest ever IPO.
LIC IPO: FDI Policy Tweak
India allows foreign direct investment (FDI) of up to 74 per cent in the insurance sector, but this does not apply to LIC, which is governed by the LIC Act. The government may now allow up to 20 per cent foreign investment in the insurer that plans to list by the end of this fiscal year.
It is proposed that a special provision may be included in the Consolidated FDI Policy for FDI in LIC, the sources added. Since the FDI ceiling for public sector banks is 20 percent under the approval route, a similar limit may be kept for FDI in LIC. But the government may consider to keep FDI in LIC under the automatic route so that capital raising process may be expedited, although the final decision will be taken by the cabinet only.
As per the current FDI policy issued by the Department for Promotion of Industry and Internal Trade (DPIIT), foreign investment is allowed in “insurance companies” and “intermediaries or Insurance Intermediary”. Since LIC is neither a company nor an intermediary, it is not covered by either. Further, no provision of FDI under either the LIC Act, 1956 or the Insurance Act, 1938 or the regulations has been made. Even the Insurance Regulatory and Development Authority Act, 1999 doesn’t have such provisions.
LIC IPO: Portions Reserved
The public issue will reserve 35 per cent of its offer for retail investors, 10 per cent for policyholders whereas 5 per cent will be reserved for LIC employees. So, apart from retail investors, life insurance policyholders and LIC employees are also waiting for LIC IPO subscription opening. However, before opening of LIC IPO subscription, there are some important information in regard to the much awaited public issue that retail investors, policyholders and LIC employees should know.
LIC IPO: Discount for Policyholders
Not only the policyholders and the employees of the insurance giant will have reserved quotas, but are also expected to get a 10 per cent discount on the issue price, which, according to Bloomberg, is expected to be priced around Rs 2,000 – Rs 2,100 apiece .
LIC IPO: Eligibility Criteria for Policyholders
LIC policyholder can claim 10 per cent quota reserved for them only when their LIC policy and PAN is linked. they can check their PAN and LIC policy linking status online by logging in at direct LIC link — linkpan.licindia.in/UIDSeedingWebApp/getPolicyPANStatus.
LIC IPO: Subscribe Via UPI
One of the ways retail investors can bid for shares in the IPO is using their Unified Payment Interface (UPI) ID. According to the LIC DRHP filed with SEBI, only retail investors, eligible employees and eligible policyholders can use the UPI mechanism.
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