LIC stake sale: Centre mulls up to $1.5 bn divestment by year-end, Sebi float rule drives move

The government is planning to sell a stake worth $1–1.5 billion (Rs 8,800–13,200 crore) in Life Insurance Corporation of India (LIC) by the end of this year, people aware of the discussions told ET.

The move is aimed at increasing the insurer’s public shareholding to 10% -- the level required under Securities and Exchange Board of India (Sebi) rules.Officials said the Department of Investment and Public Asset Management (Dipam) has started discussions to finalise the size and timing of the stake sale, according to ET. Investor roadshows are likely to be held in the next few weeks to assess market appetite.“The stake sale will be carried out in multiple tranches, and we expect the first one before the end of the current quarter,” said a person involved in the process.

The government is evaluating both the qualified institutional placement (QIP) and offer for sale (OFS) routes and will decide based on investor feedback.The Centre currently holds 96.5% in LIC. It had sold a 3.5% stake through the insurer’s record Rs 20,557 crore IPO in May 2022. To meet Sebi’s minimum public float requirement, the government must divest another 6.5% — currently valued at about $4.2 billion or a little over Rs 37,000 crore — by May 2027.

Officials said the disinvestment will be spread over several phases to prevent any sharp fall in LIC’s share price. The stock has been trading below its IPO level of Rs 949 since July 3, closing at Rs 900.7 on Tuesday, giving the company a market capitalisation of Rs 5.7 lakh crore.A senior government official said the discussions are ongoing and no final decision has been made yet. “It’s premature to comment on specifics at the moment,” the official said, quoted ET.Sebi had granted LIC a three-year extension in May 2024 to meet the 10% public float requirement. The insurer must reach 25% public shareholding by May 2032. The regulator has given similar extensions to several large state-run entities to avoid flooding the market with government shares.“LIC should not face any problem finding buyers for its additional shares because of its strong brand, government backing and dominant market position,” said Amit Khurana, head of equities at Dolat Capital Market.

“Even though there are concerns about margin pressures following the GST changes, institutional and retail investors will likely remain interested.”The GST revamp announced on September 22 removed the 18% tax on individual health and life insurance premiums. However, insurers can no longer claim input tax credits on operational expenses — a change that could affect profitability in the short term.