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Informist, Friday, Aug. 1, 2025

 

--Fin min source: Aiming to sell 2-2.5% stake in LIC via FPO in FY26
--Fin min source: Selling more than 3% LIC stake in 1 tranche seems difficult
--Fin min source: May sell 2-2.5% stake in LIC via FPO given mkt conditions
--CONTEXT: Govt has time till May 2027 to bring down stake in LIC to 90%

 

By Priyasmita Dutta and Sagar Sen

 

NEW DELHI - The government is planning to sell around 2-2.5% of its 96.5% stake in the Life Insurance Corp. of India in 2025-26 (Apr-Mar) to comply with the minimum public shareholding norms, a senior finance ministry official said Thursday. The government has to lower its stake in the insurance behemoth by 6.5% by May 2027.

 

"The entire stake sale of 6.5% will be a huge transaction, so we will do it in two to three tranches," the official said. "The attempt is to lower 2.0-2.5% stake this year but going by market conditions, 2% seems more feasible," the official told Informist. "3% is tough this year so it is unlikely," the official added.

 

In December 2023, the government had given an exemption to the life insurer by allowing it to reach 25% free float by May 2032. As per the Securities and Exchange Board of India, all listed companies must comply with minimum public shareholding norm within five years of listing. LIC on the other hand was required to have only 10% free float in the first five years and was given an additional five years to bring down the promoter stake to 75%.

 

SEBI's Securities Contract (Regulation) Rules mandates all listed companies, including public sector companies, to have a minimum public shareholding of 25%.

 

LIC went public in May 2022 and that issue was the largest in the history of capital markets in India. The government had initially planned to sell a 5% stake through the public issue, but brought down its offer-for-sale to 3.5% with a target valuation of about INR 6 trillion. The issue price of the IPO was INR 949 and it had finally listed at INR 872, 8% discount to the issue price.

 

Since then, LIC's stock price has risen only 2.6%. At 1051 IST, shares of the life insurer were trading at INR 892 on the National Stock Exchange, down 0.3%. Based on LIC's current market capitalisation, the government may raise INR 113 billion-INR 141 billion from 2%-2.5% stake sale, a back of the envelope calculation shows. 

 

According to the ministry official, considering the size of the transaction, the government is likely to prefer a follow-on public offer route for stake sale rather than going for qualified institutional placement. A final call will be taken closer to the date of transaction, the official added.

 

In FY25, LIC reported a net profit of INR 481.51 billion, up 18.4% on year. As per latest data, the public-sector insurer's first-year premiums fell 3.4% on year to INR 273.95 billion in June, however, its market share in premium income rose to 66.6% in June from 60.4% in May.  End

 

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

 

Edited by Deepshikha Bhardwaj

 

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