The Indian government has announced an offer for sale (OFS) of a stake of up to 6.5% in the Life Insurance Corporation of India (LIC). This marks the first sale of government shares in the country’s largest insurer since its initial public offering (IPO) in 2022. The sale includes a base offering of 2% equity, with an option to sell an additional 4.5% depending on market demand. The floor price for the shares has been set at Rs 382 each, as detailed in an exchange filing by LIC.

If the entire 6.5% stake is sold at the fixed floor price, the government is expected to generate approximately Rs 31,410 crore. This effort aligns with regulatory requirements set by the Securities and Exchange Board of India (Sebi), particularly aimed at achieving minimum public shareholding standards by the deadline of May 16, 2027.

According to the announcement, the President of India, through the Ministry of Finance, will oversee the sale of up to 12.65 crore equity shares, which is equivalent to 2% of LIC’s paid-up capital. Furthermore, the government retains the option to sell an additional 28.46 crore shares under an oversubscription clause, which could bring the total sold to nearly 41.11 crore shares.

Purpose of the Stake Sale

The primary purpose of the OFS is to enable LIC to meet the mandatory public shareholding norms set by Sebi. Currently, LIC’s public shareholding stands at around 3.5%. Should the government successfully sell the full 6.5% stake, the public shareholding will increase to 10%. This adjustment will allow LIC to comply with regulatory requirements well before the May 2027 deadline.

Arunish Chawla, Secretary of the Department of Investment and Public Asset Management (DIPAM), indicated that the OFS is strategically structured to help achieve these minimum public shareholding milestones ahead of the expected timeline. LIC made its stock exchange debut in May 2022, following a significant 3.5% stake dilution as part of its IPO.

This transaction is the government’s first divestment involving LIC since its initial listing and represents a critical step in the ongoing divestment programme aimed at raising additional revenue for the Centre.

Timeline and Pricing of the Offer

The OFS will open for non-retail investors on Tuesday, August 4, with the opportunity for retail investors and eligible employees to place bids the following day, August 5. Non-retail bidders who do not receive allotments on the first day have the option to carry forward their bids, adhering to Sebi’s OFS guidelines. The offer will be accessible during standard trading hours on both days.

The fixed floor price of Rs 382 per share represents about an 11% discount compared to the closing market price of Rs 428.50 on the last trading day. The actual final allocation price will be determined through the bidding process under the OFS.

Retail investors and eligible employees participating in the offer will benefit from a discount of Rs 15 per equity share on the final price. Additionally, up to 50 lakh shares have been reserved specifically for eligible employees, following applicable allocation regulations. The OFS prioritises retail investors, ensuring that a minimum of 10% of shares is reserved for this group, while at least 25% is allocated for mutual funds and insurance companies.

Eligibility and Participation Details

The OFS will be conducted through a stock exchange mechanism, allowing institutional investors to submit bids on the first day. Retail investors, defined as those bidding for shares valued up to Rs 2 lakh across exchanges, can participate on the second day. Employees may also apply under the designated employee reservation category.

The LIC stake sale is anticipated to be one of the largest divestment actions taken by the government in the current financial period. For LIC, this transaction is pivotal, as it aids the corporation in aligning with Sebi’s minimum public shareholding norms, thereby enhancing its market participation and attractiveness to investors.

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