The government has changed the Foreign Exchange Management Act provisions to allow major foreign portfolio investors (FPIs) to subscribe to shares in the public listing of the insurance giant, Life Insurance Corporation (LIC) (FEMA).
Here’s a 5-Point Guidance to the Delayed-LIC IPO Story:
1. The FEMA announcement is necessary to put into effect the previously authorised and updated Foreign Direct Involvement (FDI) policy, which allows for 20% overseas investment in the mega initial public offering (IPO).
2. The FEMA rules adjustment letter means that the insurance behemoth’s delayed-public offer might be coming shortly, with sources indicating a listing in late April or early May. The government has till May 12 to launch the LIC IPO without having to file new paperwork with the Securities and Exchange Board of India (SEBI).
3. The SEBI has accepted the LIC IPO papers, and the government expects to raise more than Rs 60,000 crores by selling roughly 31.6 crores or 5% of the life insurance firm in order to reach the Rs 78,000 crores reduced disinvestment objective in 2021-22.
4. While the government may contemplate selling a little more than 5% of its interest in the LIC IPO, it is unlikely to lower its position considerably in the insurer until at least two years after its listing, because such a move might impair returns for investors in the big IPO.
5. Even with a 5% share sale, the LIC IPO would be the largest in Indian stock market history. Once listed, the market capitalization of LIC will be equivalent to that of major corporations such as Reliance India Limited (RIL) and Tata Consultancy Services (TCS).