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Govt modifies FEMA rules to permit 20% FDI in LIC

Govt modifies FEMA rules to allow 20% FDI in LIC

NEW DELHI: The federal government has changed guidelines of the Forex Management Act (FEMA), leading the way for as much as 20 per cent foreign direct financial investment in the insurance behemoth LIC.
The federal government is preparing to dilute its stake in LIC through the Initial Public Offering (IPO). LIC in February had filed the Draft Red Herring Prospectus (DRHP) before the markets regulator Sebi for the IPO.
Last month, Sebi gave approval to the draft documents and the insurance provider is in the procedure of submitting a demand for proposition with modifications.
Following the Cabinet approval, the Department for Promo of Market and Internal Trade (DPIIT) on March 14 had actually changed the Foreign Direct Investment (FDI) policy to help with overseas investment in LIC ahead of the mega public offer.
FEMA notice was needed to operationalise the arrangements DPIIT issued through a press note, including FDI policy modifications that will allow large foreign portfolio investors to register for shares of LIC.
“These guidelines might be called the Forex Management (Non-debt Instruments) (Amendment) Guidelines, 2022,” said a gazette notice provided just recently.
The notice has actually inserted a paragraph in the existing policy, allowing as much as 20 percent FDI in LIC through the automatic route.
Given that the foreign inflows’ ceiling for public sector banks is 20 percent under government approval route according to the present FDI policy, it has been decided to allow foreign financial investment of up to 20 per cent in LIC and other such corporate bodies.
“Foreign investment in LIC will go through the arrangements of the Life Insurance Coverage Corporation Act, 1956, (LIC Act) as amended from time to time and such provisions of the Insurance coverage Act, 1938, as modified from time to time, as are relevant to LIC,” it said.
Setting the stage for the nation’s biggest-ever public offering, Sebi has actually authorized the draft prospectus for sale of a 5 per cent stake by the federal government for an estimated Rs 63,000 crore.
According to the draft paper, LIC’s ingrained worth, a step of the combined investors’ value in an insurance coverage company, has been pegged at about Rs 5.4 lakh crore since September 30, 2021 by global actuarial company Milliman Advisors.
Although the DRHP does not disclose the marketplace evaluation of LIC, based on industry requirements it would have to do with 3 times the ingrained worth or around Rs 16 lakh crore.
The LIC public problem is anticipated to be the biggest IPO in the history of the Indian stock market. As soon as noted, LIC’s market appraisal will be comparable to top companies like RIL and TCS.
So far, the amount mobilised from IPO of Paytm in 2021 was the biggest ever at Rs 18,300 crore, followed by Coal India (2010) at nearly Rs 15,500 crore and Dependence Power (2008) at Rs 11,700 crore. PTI DP

Released at Sun, 17 Apr 2022 08:55:12 +0000

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