India to Sell Up to 6.5% Stake in LIC Through OFS; Government Eyes ₹31,000 Crore

The government of India will sell up to a 6.5% stake in LIC through an Offer for Sale (OFS) in what is the first such sale of LIC’s shares since LIC’s landmark stock market listing in 2022. The move is to help the Centre to raise more than ₹31,000 crore as well as to increase LIC’s public shareholding in line with market standards.

According to the announcement, the government will initially offer a 2.5% stake and then an additional 4% through a green shoe option, which would bring the total divestment to 6.5% if investors remain strong. The OFS will be open to non-retail investors first, and retail investors on the following trading day.

The floor price has been fixed at ₹382 per share, which is a discount to LIC's previous closing market price. If the whole issue is fully subscribed at the floor price, the government will mobilise approximately ₹31,000–₹31,400 crore, making it one of the largest disinvestment exercises of the current financial year.

One of the main objectives of the stake sale is to help LIC to meet the minimum public shareholding (MPS) requirement set up by the Securities and Exchange Board of India (SEBI). The government currently owns around 96.5% of LIC and only 3.5% of the insurer's shares have been public. LIC has been told by SEBI to have at least 10% share in public companies by May 2027 and it will help the insurer achieve this target quicker.

The news was followed by a sharp reaction in the stock market. LIC shares fell as much as 8-9% in early trading on the basis of the low price and the high amount of shares coming into the market. Such price corrections are common in large government stake sales because the low price will put pressure on the stock in the short term.

Because the LIC sale is part of the Centre’s broader disinvestment strategy, which is aimed at raising resources and improving liquidity at state-owned companies; the government has already raised substantial funds this fiscal through stake sales in other public sector companies and continues to pursue its broader capital-raising programme.

The OFS would find the support of both institutional and retail investors due to LIC’s great market share in India’s life insurance industry and the sale price of LIC's group with attractive price points. But investors should take stock of the company in terms of long-term prospects and market conditions before investing in them.

With this transaction, the Indian government has taken a significant step towards meeting regulations and solidified India’s public sector disinvestment programme.