Govt is planning to sell 2-3% LIC stake in FY26, may seek extension

The LIC stake sale may be split into two rounds for better value, with the government likely to seek an extension if market conditions turn unfavourable

The central government is considering offloading a 2-3 per cent stake in Life Insurance Corporation (LIC) during the financial year 2025-26, contingent on market conditions, according to a report by Mint. This move aligns with its plan to meet regulatory requirement of a 10 per cent public shareholding by 2027.

 

Rather than a single large sale, the stake sale may be executed in multiple smaller tranches, provided market conditions are conducive. The government aims to optimise the value of its holdings in LIC through a strategic and phased approach.

 

The report quoted a source as saying that the objective is to maximise LIC’s stock value, and given the insurer’s market size and capitalisation, any stake sale will significantly impact the market.

 

 

Instead of a one-time offering, the sale is likely to be split into two rounds to ensure better value realisation. If market conditions turn unfavourable, the government may seek an extension.

 

Govt invites bids for stake sale

In a related development, the Department of Investment and Public Asset Management (Dipam) under the Ministry of Finance recently invited bids from merchant bankers and legal advisors to oversee the sale of minority stakes in several public sector banks (PSBs) and financial institutions, including LIC, over the next three years.  

 

Currently, the government holds a 96.5 per cent stake in LIC, following the insurer’s initial public offering (IPO) in May 2022, which raised approximately Rs 21,000 crore through a 3.5 per cent stake sale.  

 

As of Tuesday, LIC shares were trading at Rs 754.10 per share on the Bombay Stock Exchange (BSE). Based on the insurer’s market capitalisation of around Rs 4.8 trillion, a potential 2-3 per cent stake sale could fetch between Rs 9,500 crore and Rs 14,500 crore, the news report said.

 

Regulatory deadline for public shareholding

Initially, the Securities and Exchange Board of India (Sebi) had set a May 2024 deadline for LIC to comply with the 10 per cent minimum public shareholding rule. However, this was later extended to May 16, 2027, giving the insurer additional time to meet the requirement.  

 

The source, quoted earlier by the report, said the government intends to lower its stake to 10 per cent by the 2027 deadline but could seek another extension if market conditions remain challenging.

 

In June last year, it was reported that the government had put the LIC stake sale on hold for 2024-25 to assess investor sentiment, with the next potential divestment likely in FY26.  

 

The source said that the upcoming sale could involve 1.5 per cent of the government's holding, which would increase the public float to 5 per cent and potentially enable LIC’s inclusion in index funds. This could be followed by an additional sale of 1 per cent-1.5 per cent, depending on market conditions.