LIC's OFS oversubscribed 3.32 times; govt uses 4% greenshoe option

Shares tumbled nearly 9% on Tuesday even as bids worth over Rs 36k cr recd; settle at an over two-month low

The Centre on Tuesday evening exercised the greenshoe option of 4 per cent in the offer for sale (OFS) of Life Insurance Corporation of India (LIC) after the non-retail portion of the issue was oversubscribed 3.32 times on the opening day, taking the total offer size to 822.25 million shares, or 6.5 per cent of the insurer's equity. With the greenshoe option, the latest OFS has become India's largest secondary share sale through a stock exchange platform.

 

But, even as institutional demand remained strong, LIC shares came under pressure during Tuesday's trade as the discounted stake sale weighed on investor sentiment. The stock fell 8.7 per cent to close at ₹391.30 on the NSE after hitting an intraday low of ₹388.80, its lowest closing since May 12.

 

 

The share price decline followed the government's decision to fix the OFS floor price at ₹382 per share, representing a 10.8 per cent discount to Monday's closing price of ₹428.50. Even after Tuesday's decline, the stock closed about 2.4 per cent above the OFS price. LIC's market capitalisation stood at around ₹4.95 trillion.

 

The government will sell an additional 506 million shares, equivalent to a 4 per cent stake, over and above the base offer of 316.25 million shares. 

 

"The offer for sale in Life Insurance Corporation of India (LIC) received an overwhelming response from institutional investors and was oversubscribed 3.32 times its base size. This enthusiastic participation reflects robust investor confidence and the depth of India's capital markets. In view of the exceptional demand, the Government has decided to exercise the greenshoe option. Retail investors get to bid tomorrow (Wednesday)," the Department of Investment and Public Asset Management (DIPAM) said in a statement.

 

Non-retail investors bid for 944.5 million shares, worth about ₹36,250 crore at the indicative clearing price of ₹383.84 per share. The strong response prompted the government to exercise the greenshoe option, increasing the offer size to 822.25 million shares. The indicative clearing price was ₹1.84 above the floor price of ₹382.

 

The largest bids were placed between ₹383 and ₹385, with the single largest order for 188.7 million shares at ₹383.10, followed by bids for 69.9 million shares at ₹383.50 and 57.6 million shares at ₹384.10. The retail portion of the OFS opens on Wednesday.

 

The government had on Monday announced an OFS comprising a base offer of 2.5 per cent of LIC's paid-up equity, along with a greenshoe option to sell an additional 4 per cent, taking the total potential stake sale to 6.5 per cent. This will help LIC meet the minimum public shareholding (MPS) milestone.

 

The stake sale comes at a time when India's equity capital markets have witnessed subdued activity. Geopolitical tensions, volatility in global markets and uncertainty over the economic outlook have weighed on investor appetite for fresh equity issuances. While block deals and qualified institutional placements (QIPs) have remained active, the initial public offering (IPO) market has yet to regain momentum.

 

The government had divested a 3.5 per cent stake in LIC through its initial public offering in May 2022, raising about ₹21,000 crore at an issue price of ₹949 per share. 

 

According to analysts, the sharp decline in LIC's share price was largely driven by the size of the OFS and the steep discount offered to investors.

 

"The nearly 10 per cent discount makes the risk-reward attractive for short-term investors. However, even after the OFS, the government will continue to hold around 90 per cent of LIC, leaving the possibility of future stake sales as an overhang on the stock," an analyst said.

 

Another analyst said the strong institutional response on the opening day reflected healthy demand. "As long as the market price remains above the OFS price, retail investors have an incentive to participate, and any unsubscribed retail portion can be absorbed by institutional investors," the analyst said.

 

The stake sale is part of the government's plan to increase LIC's public float and move the insurer closer to complying with the Securities and Exchange Board of India's minimum public shareholding (MPS) norms. The government held 96.5 per cent in LIC as of June 30, 2026. Even after the entire 6.5 per cent stake is sold under the OFS, the Centre will continue to own about 90 per cent of the insurer.