Centre Plans to Offload Up to 6.5% LIC Stake, Eyes Rs 31,000 Crore Through OFS
Discounted offer aims to boost public shareholding to Sebi norms while strengthening the Centre's disinvestment receipts for FY27.
Mumbai, Aug 04 : The Centre has launched the country’s biggest offer for sale (OFS), proposing to offload up to a 6.5% stake in the state owned Life Insurance Corporation (LIC) in a move that could generate nearly Rs 31,400 crore. The issue opens for institutional investors on Tuesday, while retail investors will be able to participate on Wednesday.
According to the exchange filing, the government has set a floor price of Rs 382 per share, nearly 10% lower than LIC’s closing price of Rs 424 on the BSE on Monday. The sale begins with a 2.5% base offer, covering 31.6 crore shares, along with a greenshoe option allowing the sale of an additional 4% stake, or 50.6 crore shares, if investor demand remains strong.
The transaction is expected to significantly increase LIC’s public float. At present, public shareholders own about 3.5% of the insurer. If the full issue is subscribed, the public shareholding will rise to 10%, enabling the company to comply with the Securities and Exchange Board of India’s (Sebi) minimum public shareholding requirement ahead of the prescribed timeline.
Department of Investment and Public Asset Management (DIPAM) Secretary Arunish Chawla said the share sale would help LIC achieve the mandatory public shareholding threshold earlier than expected, marking a key milestone in the government’s broader capital market reforms.
The government has structured the OFS so that non-retail investors can place bids on the first day, while retail investors will get an exclusive opportunity to participate on the final day of the offer.
The proposed divestment follows LIC’s 1:1 bonus share issue announced in May, which increased the insurer’s outstanding equity. The current stake sale is designed to enhance market liquidity while supporting the Centre’s fiscal strategy.
If the entire 6.5% stake is sold, total disinvestment proceeds for the current financial year are expected to rise from around Rs 21,000 crore to over Rs 52,000 crore. Including approximately Rs 6,367 crore raised through asset monetisation, the government’s total capital receipts from strategic sales would approach Rs 60,000 crore, moving closer to its Rs 80,000 crore annual target.
The government is also advancing the proposed divestment of IDBI Bank, which could further strengthen revenue from strategic asset sales. Higher receipts are expected to provide additional fiscal space to manage increased expenditure on fuel and fertiliser subsidies while maintaining the Budget’s fiscal deficit target of 4.3% of GDP.
Market participants will closely watch investor response to the record sized issue, as successful execution would reinforce confidence in India’s disinvestment programme and improve trading liquidity in one of the country’s largest listed financial institutions.
