MUMBAI: The Central government has launched an offer for sale (OFS) of up to 6.5 per cent in Life Insurance Corporation of India (LIC), marking its first stake sale in the insurer since the 2022 initial public offering (IPO) and taking a major step towards meeting SEBI's public shareholding requirement.
The OFS opened for institutional investors on August 4 and for retail investors on August 5 (.Wednesday)
The OFS comprises a base offer of up to 2 per cent of LIC's equity, with a greenshoe option to sell an additional 4.5 per cent if investor demand is strong. The government has fixed a floor price of Rs382 per share, below which bids will not be accepted.
Unlike most listed companies, which are required to maintain a minimum public shareholding (MPS) of 25 per cent under SEBI regulations, LIC has been granted a phased compliance schedule because of its size.
The market regulator has directed the insurer to increase its public shareholding to at least 10 per cent by May 16, 2027. LIC's public float currently stands at about 3.5 per cent.
10% target
If the entire 6.5 per cent stake is sold, LIC's public shareholding will rise to the mandated 10 per cent, while the government's holding will decline correspondingly.
The stake sale is being carried out through the stock exchange's Offer for Sale mechanism, under which investors bid for shares at or above the notified floor price.
Institutional investors bid during the non-retail window, while retail investors participate in a separate retail window. In the event of oversubscription, shares are allotted in accordance with SEBI's OFS allocation framework.
Unlike an IPO or a follow-on public offer, the OFS does not involve the issue of fresh shares by LIC. The shares are being sold by the government, which will receive the sale proceeds. LIC will not receive any funds from the transaction.
The proposed sale, if fully subscribed at the floor price, could mobilise more than Rs31,000 crore for the government, making it one of the largest disinvestment transactions under the Centre's FY27 divestment programme.
The government had diluted a 3.5 per cent stake in LIC through its May 2022 IPO, one of India's largest public issues. The current OFS marks its first follow-on stake sale in the insurer.
