Major old rule could be changed by the center ahead of LIC’s mega-IPO

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Listing could value LIC up to $ 261 billion.

India is considering allowing foreign direct investment in Life Insurance Corporation, according to a person familiar with the matter, which could allow a single foreign investor to buy a significant stake in the company which is heading towards a mega-IPO.

Any strategic investment would be subject to a cap, although it is not clear at what level it would be set, the person said, asking not to be identified as deliberations are private. Attendees at a meeting earlier this month noted a 20% FDI limit on state-owned banks, the person said.

Allowing FDI in LICs would allow so-called strategic investors, such as massive pension funds or insurance companies, to participate in the initial public offering, which is expected to be the largest ever made by India. The Reserve Bank of India defines FDI as the purchase of a stake of at least 10% by a person or entity based abroad.

Bankers looking to organize LIC’s IPO are due to make presentations to the government on Thursday. The administration of Prime Minister Narendra Modi – who owns 100% of LIC – is considering the sale to help narrow its budget gap to 6.8% of gross domestic product in the year through March 2022.

The listing could value LIC up to $ 261 billion, based on its assets under management and using private sector insurers as a benchmark, analysts at Jefferies India wrote in a February note.

While FDI of up to 74% is allowed in most Indian insurers, the rules do not apply to LIC as it is a special entity created by an act of Parliament, the person said, adding that discussions regarding FDI are at an early stage. step and no final decision has yet been made. A spokesperson for the Ministry of Finance could not immediately be reached for comment.

BNP Paribas SA, Citigroup Inc. and Goldman Sachs Group Inc. are among the seven foreign banks competing to manage the IPO. Nine Indian companies include HDFC Bank Ltd. and Axis Capital.

(Except for the title, this story was not edited by NDTV staff and is posted from a syndicated feed.)

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