Centre to sell minor stake in LIC through OFS: Report

New Delhi: The central government, which controls 96.5% stake in Life Insurance Corporation (LIC), plans another round of stake dilution through the Offer for Sale (OFS) route, sources said.

The government has given in-principle approval. Further details and timing of the sale will be decided by the Department of Investment and Public Asset Management (DIPAM) depending on the market conditions.

“It is up to the disinvestment department to look at the market condition and conclude the stake sale,” PTI reported quoting a source.

The central government raised around Rs 21,000 crore by offloading 3.5% of its stake in the country’s largest insurer through an initial public offering (IPO) in May 2022.

Before the May 2022 IPO, Life Insurance Corporation of India was wholly owned by the government of India. It was set up in 1956 by an Act of Parliament ‘Life Insurance Corporation Act, 1956’ with a capital contribution of Rs 5 crore from the Government of India.

The share price of LIC dipped by 2.01% to Rs 926.85 at the BSE on Thursday. As per the current stock market price, LIC is valued at around Rs 6 lakh crore. The company’s current market valuation is nearly the same as it was estimated during the IPO. In the IPO Life Insurance Corporation’s shares were allocated to subscribers at Rs 949 apiece.  

An IPO is when a company offers shares to the public for the first time. In the process, the company also transitions to becoming a publicly traded entity on stock exchanges. An Offer for Sale is a mechanism where promoters in a listed company sell their shares directly to the public.

As per the Securities and Exchange Board of India (Sebi) norms, all listed companies are required to ensure that at least 25% of their equity shares are held by non-promoters.

The market regulator has given LIC relaxation on the request of the government of India, which is the promoter of the company. The Sebi has given LIC time till May 2027 to achieve 10% public shareholding.

This means the government is required to divest at least 6.5% of its stake in LIC in the next two years to meet the market regulator’s norms. At the current market valuation 1% stake sale in LIC would fetch the government around Rs 6,000 crore.

According to the sources, the required 6.5% stake sale is likely to happen in phases. The Department of Investment and Public Asset Management (DIPAM), which deals with all matters relating to the central government investments in equity including disinvestment of equity in the central public sector enterprises, is likely to take the decisions on volume and time of the stake sale in LIC depending on the market conditions.