The stake sale may be carried out in multiple small tranches rather than a single offering during the upcoming fiscal year, provided market conditions are favourable, as the Centre aims to maximize the value of its shareholding in the insurer.
“The government wants to maximize the value of LIC stock. Given the company’s size and market capitalization, any share sale will be significant for the market,” the first person mentioned above said, requesting anonymity.
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“However, rather than a single offering, the sale may be executed in two tranches to ensure optimal value realization. In case of adverse market conditions, the government could seek for further extension,” the person mentioned above added.
Last month, the ministry of finance’s department of investment and public asset management (Dipam) invited bids from merchant bankers and legal advisers to facilitate the sale of minority stakes in some public sector banks (PSBs) and financial institutions, including LIC, to be carried out over the next three years.
The government currently holds a 96.5% stake in LIC, following the sale of a 3.5% stake through the company’s initial public offering (IPO) in May 2022, which raised around ₹21,000 crore.
The LIC stock was trading at ₹754.10 apiece at the BSE on Tuesday.
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Currently, a 2-3% stake sale in the LIC would be worth approximately ₹9,500 crore to ₹14,500 crore, based on its current market capitalization of around ₹4.8 trillion.
To be sure, the Securities and Exchange Board of India (Sebi) had initially set a May 2024 deadline for LIC to comply with the 10% minimum public shareholding rule.
However, this deadline was extended till 16 May 2027, providing the insurer additional time to meet the requirement.
“The government aims to reduce its stake to 10% by May 2027 but may seek a further extension if market conditions or other challenges hinder the process,” the second person mentioned above said, requesting anonymity.
“As things stand, the markets are down. However, things are expected to get better by the latter part of the next fiscal,” added the person mentioned above.
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Last June, Mint reported that the government’s next LIC stake sale is likely in FY26, as it paused the stake sale process during 2024-25 to gauge investor appetite.
“The next share sale (of LIC) could be just 1.5%, raising public float to 5% and enabling LIC’s inclusion in index funds, which could be followed by another 1%-1.5% share sale depending on the market conditions,” the first person mentioned above said.
“The final stake size will depend on market conditions at the time,” the person added.
The spokespersons of the ministry of finance and LIC didn’t respond to emailed queries.
LIC’s market capitalization at the time of listing in May 2022 stood at about ₹5.5 trillion, making it India’s fifth most valuable company.
However, the company’s value has eroded considerably since then.
Recent challenges
In the last few months, shares of LIC have come under pressure amid multiple headwinds and weak market conditions.
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Experts noted that the central government is in no hurry to divest its LIC stake and will wait for a more favourable market environment and, if necessary, may even seek another extension from the regulator to meet the public shareholding requirement.
“They will look at the most opportune time and carry out the stake sale when the market recovers,” said Madan Sabnavis, chief economist at the Bank of Baroda.
“The markets are expected to remain volatile in the coming months due to global uncertainties, and corporate earnings pressure. We will have to wait for global stability and better corporate earnings for a recovery,” he added.
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