Govt to sell up to 6.5% stake in LIC via OFS; floor price set at Rs 382 per share

The Centre has launched an offer for sale in LIC, with a base 2% sale and an option to divest another 4.5% at a floor price of Rs 382 a share. The sale is aimed at helping the insurer meet Sebi's public shareholding norms ahead of the 2027 deadline.

In Short

• Centre to sell up to 6.5% stake in LIC via OFS
• Base offer is 2% equity with option for 4.5% more
• Sale aids LIC in meeting Sebi's public shareholding norms

The Centre on Monday announced an offer for sale (OFS) of up to a 6.5% stake in Life Insurance Corporation of India (LIC), marking the government's first stake sale in the country's largest insurer since its landmark initial public offering (IPO) in 2022.

The offer comprises a base sale of up to 2% equity, with an option to sell an additional 4.5% stake if there is sufficient demand. The floor price has been fixed at Rs 382 per equity share, according to an exchange filing by LIC.

At the floor price, the full 6.5% stake sale could fetch the government about Rs 31,410 crore, Reuters reported.

The stake sale is aimed at helping LIC meet Sebi's minimum public shareholding (MPS) norms ahead of the May 16, 2027 deadline.

WHAT IS THE GOVERNMENT SELLING?

According to the exchange filing, the President of India, acting through the Ministry of Finance, will sell up to 12.65 crore equity shares in the base offer, representing 2% of LIC's paid-up equity share capital.

In addition, the government has retained an oversubscription option to sell another 28.46 crore shares, equivalent to 4.5% of LIC's equity capital.

If the oversubscription option is fully exercised, the total offer size will increase to nearly 41.11 crore shares, or 6.5% of LIC's paid-up equity capital.

WHY IS THE GOVERNMENT SELLING ITS STAKE?

The primary objective of the OFS is to help LIC comply with Sebi's minimum public shareholding norms.

LIC currently has a public shareholding of around 3.5%. If the government sells the entire 6.5% stake, the insurer's public shareholding will rise to 10%, allowing it to meet the regulatory requirement well ahead of the May 2027 deadline.

"This (OFS) will help achieve MPS milestones ahead of schedule," Department of Investment and Public Asset Management (DIPAM) Secretary Arunish Chawla said in a post on X, according to Reuters.

LIC had listed on the stock exchanges in May 2022 after the government diluted a 3.5% stake through one of India's biggest-ever IPOs. This is the government's first divestment in the insurer since that listing.

WHEN WILL THE LIC OFS OPEN?

As per the exchange filing, the OFS will open for non-retail investors on Tuesday, August 4.

Retail investors and eligible employees will be able to place bids on Wednesday, August 5. Non-retail investors whose bids are not allotted on the first day can also carry forward and revise their bids on the second day in accordance with Sebi's OFS guidelines.

The offer will remain open during normal trading hours on both days.

WHAT IS THE FLOOR PRICE?

The government has fixed the floor price at Rs 382 per equity share.

LIC shares ended Monday's trading session 0.9% higher at Rs 428.50, Reuters reported. This means the floor price is about 11% lower than Monday's closing market price.

The final allocation price will be determined through the OFS process.

DISCOUNT FOR RETAIL INVESTORS AND EMPLOYEES

Retail investors and eligible employees participating in the OFS will receive a discount of Rs 15 per equity share on the discovered price, according to the exchange filing.

The filing also states that up to 50 lakh equity shares have been reserved for eligible employees, subject to applicable allocation rules.

In line with Sebi's OFS framework, at least 10% of the offer shares have been reserved for retail investors, while a minimum of 25% has been earmarked for mutual funds and insurance companies. Any unsubscribed portion under these categories will be available to other eligible bidders.

WHO CAN PARTICIPATE?

The OFS will be conducted through the stock exchange mechanism.

Institutional investors can bid on the first day of the issue, while retail investors—defined as those bidding for shares worth up to Rs 2 lakh across exchanges—can participate on the second day. Eligible employees can also apply under the employee reservation category.

The OFS marks a significant milestone in the government's divestment programme.

Reuters reported that the Centre has set a divestment and asset monetisation target of Rs 80,000 crore for FY27. It has already raised about Rs 21,200 crore this financial year through stake sales in public sector companies, including NHPC, Coal India and Indian Railway Finance Corporation (IRFC).

The LIC stake sale is expected to be one of the government's biggest divestment exercises this financial year.

For LIC, the transaction is equally significant as it will help the insurer move closer to meeting Sebi's minimum public shareholding norms well before the stipulated deadline, improving free float and potentially increasing investor participation in the stock.

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