Indian cabinet approves up to 20% FDI in insurance giant LIC – source

The Life Insurance Corporation of India (LIC) logo is seen displayed on a smartphone in this illustration taken February 20, 2022. REUTERS/Dado Ruvic/File Photo

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NEW DELHI, Feb 26 (Reuters) – India’s cabinet on Saturday approved a policy amendment allowing foreign direct investment of up to 20% in Life Insurance Corp of India (LIC), a government source said, a change aimed at facilitating the rating of public insurers.

India’s biggest insurance company plans to issue a 5% stake to raise around $8 billion next month for the South Asian nation’s biggest initial public offering (IPO) by far.

The amendment would allow foreign direct investors to buy up to 20% of LIC shares through an automatic route, said the government source, who spoke on condition of anonymity after the cabinet meeting.

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Under current rules, foreign investment is not allowed in LICs, governed by special law of Parliament, while 74% of foreign direct investment is allowed in other private insurance companies.

The amendment would allow the government to raise the limit on foreign direct investment in LICs up to 20%, on par with the rule for state-owned banks, the government source said.

The cabinet’s decision comes amid growing concerns among some investors that the government may postpone the public listing of LIC due to growing market volatility following Russia’s invasion of Ukraine.

Government officials, however, said there were no plans to postpone registration of the insurance company – essential for fundraising plans for budgeted expenditure.

During the IPO, the company will also reserve a certain percentage of shares for policyholders, not exceeding 10% of the size of the offer, while the share reserved for employees will not exceed 5% of the share capital. post-offer, according to the IPO Filing. LIC employed 114,498 people at the end of March 2021.

LIC, which was formed six decades ago when India’s insurance industry was nationalized, straddles the business in the country, with over 280 million policies and more than 60% of the insurance segment.

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Reporting by Aftab Ahmed; Written by Manoj Kumar; Editing by Clarence Fernandez

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