Ahead of the much-awaited IPO, the Union Cabinet on Saturday gave its nod to foreign direct investment (FDI) in the Life Insurance Corporation of India (LIC).

The Cabinet, chaired by Prime Minister Narendra Modi, has allowed up to 20 per cent FDI in the insurance major under the automatic route.

Since as per the present FDI policy, the foreign inflows ceiling for public sector banks is 20 per cent under government approval route, it has been decided to allow foreign investment of up to 20 per cent for LIC and such other corporate bodies.

According to the current FDI policy, 74 per cent foreign investment is permitted under the automatic route in the insurance sector. However, these rules do not apply to the Life Insurance Corporation of India (LIC), which is administered through a separate LIC Act.

The initial public offering of LIC received Cabinet not in July 2021. On February 13, the insurance behemoth filed draft papers with capital market regulator Sebi for the sale of 5 per cent stake by the government for an estimated Rs 63,000 crore.

The initial public offering of over 31.6 crore shares or 5 per cent government stake will likely get listed on D-street in March. Employees and policyholders of the insurance behemoth would get a discount over the floor price.

According to the draft red herring prospectus (DRHP), LIC’s embedded value, which is a measure of the consolidated shareholders value in an insurance company, has been pegged at about Rs 5.4 lakh crore as of September 30, 2021, by international actuarial firm Milliman Advisors.

The LIC public issue would be the biggest IPO in the history of the Indian stock market. Once listed, LIC’s market valuation would be comparable to top companies like RIL and TCS.