The government may not be required to amend any legislation to allow foreign participation in the proposed initial share sale of insurance giant Life Insurance Corporation of India (LIC), sources said.

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Foreign participation would be allowed as per the listing norms of the Securities and Exchange Board of India (SEBI) and the extant sectoral FDI guidelines, they added.

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Apart from the government and Reserve Bank, foreign investment in the insurance sector is also regulated by the Insurance Act, IRDA Act and the rules made thereunder, which are implemented by sector regulator IRDAI.

The initial public offering (IPO) of LIC would be also guided by IRDAI capital regulations.

If any clarification is required, the government can come out with amendments to relevant rules, the sources said.

To facilitate the listing of LIC, the government earlier this year made amendments to the Life Insurance Corporation Act, 1956.

As per the amendment, the central government will hold at least 75 per cent in LIC for the first five years post the IPO, and subsequently hold at least 51 per cent at all times after five years of the listing.

The authorised share capital of LIC shall be Rs 25,000 crore divided into 2,500 crore shares of Rs 10 each, as per the amended legislation. Up to 10 per cent of the LIC IPO issue size would be reserved for policyholders.

In her Budget 2021 speech, Finance Minister Nirmala Sitharaman said the IPO of LIC would be launched in the financial year beginning April 1. Currently, the government owns 100 per cent stake in LIC.

Once listed, LIC is likely to become one of the biggest domestic companies by market capitalisation with an estimated valuation of Rs 8-10 lakh crore.

The Department of Investment and Public Asset Management (DIPAM), which manages the government's equity in state-owned companies, has selected actuarial firm Milliman Advisors for ascertaining the embedded value of LIC for meeting the government's disinvestment target.

Last month, DIPAM appointed 10 merchant bankers, including Goldman Sachs (India) Securities, Citigroup Global Markets India and Nomura Financial Advisory and Securities (India), to manage the mega initial public offering of the country's largest insurer.

Other selected bankers include SBI Capital Markets, JM Financial, Axis Capital, BofA Securities, J P Morgan India, ICICI Securities and Kotak Mahindra Capital Co Ltd.

The Cabinet Committee on Economic Affairs had in July cleared the initial public offering proposal of LIC.

The listing of LIC will be crucial for the government in meeting its disinvestment target of Rs 1.75 lakh crore for 2021-22 (April-March).
So far this fiscal, Rs 9,110 crore has been mopped up through minority stake sales in PSU and sale of SUUTI stake in Axis Bank.