Mumbai|New Delhi: The Centre is considering sale of stake worth $1-1.5 billion (₹8,800-13,200 crore) in Life Insurance Corp (LIC) of India by year-end, with roadshows likely in the next few weeks, said people aware of the matter. The exercise is part of the government's effort to increase the public float to 10% as mandated by the Securities and Exchange Board of India (Sebi), they said.
The government had sold 3.5% in LIC through an initial public offering in May 2022, raising ₹20,557 crore, one of the largest share sales in India. It needs to sell another 6.5% - currently valued at $4.2 billion or just over ₹37,000 crore - by May 16, 2027, to meet the minimum public float threshold. The government currently holds 96.5%. It intends to sell the 6.5% stake in parts within the deadline but will stagger these, said the people cited.
Decision Based on Investor Demand
This is so the stock price isn't driven down and existing shareholders don't get affected, they said.
"The stake sale will be conducted in multiple tranches, and we expect the first tranche before the end of the current quarter," said a merchant banker aware of the matter.
LIC's share price has been ruling below the IPO level of ₹949 since July 3. It closed at ₹900.7 on Tuesday, up marginally, for a market value of ₹5.7 lakh crore.
The Department of Investment and Public Asset Management, which will be handling the process, has stepped up deliberations to finalise the precise timeline and the quantum of the next stake sale, the people said.
It's also in the process of deciding how to move forward with the transaction - qualified institutional placement (QIP) or offer for sale (OFS).
This decision will be based on investor demand in roadshows, expected in the coming weeks, said one of the persons cited.
A senior government official said discussions are going on but a decision is yet to be made on the matter. "It's premature to comment on the specifics at the moment," he said.
Meeting Norms
In May 2024, LIC got a three-year extension from the Securities and Exchange Board of India to comply with the 10% public float requirement. LIC has to meet a 25% public shareholding requirement by May 2032.
The regulator has extended the deadline for many large entities, including state-run financial institutions such as banks, to achieve the mandated 25% public float requirement to avoid the risk of oversupply of shares at any given point.
"LIC should face no problem finding buyers for its additional shares because of a strong government backing and its market leadership position," said Amit Khurana, head of equities at Dolat Capital Market.
"Though there have been some concerns over margin erosion post the new GST announcement, LIC will find takers for its shares among both institutions and retail investors."
The GST overhaul of September 22 abolished the 18% levy on individual health and life insurance premiums. That means insurers can't claim input tax credits on related operational expenses.
The government had sold 3.5% in LIC through an initial public offering in May 2022, raising ₹20,557 crore, one of the largest share sales in India. It needs to sell another 6.5% - currently valued at $4.2 billion or just over ₹37,000 crore - by May 16, 2027, to meet the minimum public float threshold. The government currently holds 96.5%. It intends to sell the 6.5% stake in parts within the deadline but will stagger these, said the people cited.
Decision Based on Investor Demand
This is so the stock price isn't driven down and existing shareholders don't get affected, they said.
"The stake sale will be conducted in multiple tranches, and we expect the first tranche before the end of the current quarter," said a merchant banker aware of the matter.
LIC's share price has been ruling below the IPO level of ₹949 since July 3. It closed at ₹900.7 on Tuesday, up marginally, for a market value of ₹5.7 lakh crore.
The Department of Investment and Public Asset Management, which will be handling the process, has stepped up deliberations to finalise the precise timeline and the quantum of the next stake sale, the people said.
It's also in the process of deciding how to move forward with the transaction - qualified institutional placement (QIP) or offer for sale (OFS).
This decision will be based on investor demand in roadshows, expected in the coming weeks, said one of the persons cited.
A senior government official said discussions are going on but a decision is yet to be made on the matter. "It's premature to comment on the specifics at the moment," he said.
Meeting Norms
In May 2024, LIC got a three-year extension from the Securities and Exchange Board of India to comply with the 10% public float requirement. LIC has to meet a 25% public shareholding requirement by May 2032.
The regulator has extended the deadline for many large entities, including state-run financial institutions such as banks, to achieve the mandated 25% public float requirement to avoid the risk of oversupply of shares at any given point.
"LIC should face no problem finding buyers for its additional shares because of a strong government backing and its market leadership position," said Amit Khurana, head of equities at Dolat Capital Market.
"Though there have been some concerns over margin erosion post the new GST announcement, LIC will find takers for its shares among both institutions and retail investors."
The GST overhaul of September 22 abolished the 18% levy on individual health and life insurance premiums. That means insurers can't claim input tax credits on related operational expenses.
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