fdi: Ahead of IPO, govt allows 20% FDI via automatic route in LIC

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NEW DELHI: Ahead of the planned public issue, the government on Saturday allowed 20% foreign direct investment (FDI) in Life Insurance Corporation via the automatic route.
The move also signals that the government is keen to pursue the mega initial public offer of the insurance behemoth despite the choppy markets in the wake of Russia’s invasion of Ukraine.
While the government allows 74% FDI in the insurance sector, overseas investment was not allowed in LIC, which is governed by a special statute. Now the government has sought to bring parity in terms of allowing foreign flows before the IPO but has aligned the rules for those applicable to public sector banks.
The government is keen to complete the listing of LIC by the end of March as part of its efforts to bolster revenues and close the year with a fiscal deficit of 6.9% of GDP. Though the recent developments in Ukraine have brought in some uncertainty about the timing, the government and bankers for the issue are going ahead with the roadshows.
While a large portion of the issue is proposed to be earmarked for retail investors and policyholders, overseas investors too are expected to invest large amounts in LIC.
Government sources said that the Union Cabinet which met on Saturday also cleared a few other changes to the FDI regime as part of the efforts to simplify the mechanism and make it attractive for overseas investors to pump in money into the country.
The details of the amended regime will be notified over the next few days. The changes are meant “to provide greater clarity and updated, consistent and easily comprehensible FDI framework”, an official source said.
“The measures taken by the government with FDI policy reforms, investment facilitation and ease of doing business, have contributed to India attracting record FDI inflows in the recent past,” an official said.
FDI inflows hit a record high of $74.4 billion during the last financial year as mega deals involving Reliance Jio pushed up inflows. Latest data released by the commerce and industry ministry showed a 16% decline in FDI flows during April-December 2021 and were estimated at $43 billion, compared with $51.5 billion during the corresponding period of the previous year.

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