Govt to Start Selling LIC Stakes to Meet Sebi Norms: Here's How

The Union government is reportedly planning to start selling its stakes in insurance behemoth Life Insurance Corporation of India (LIC) to meet Sebi's minimum 10% public shareholding requirement. At present, only 3.5% of LIC's total equity is traded on stock exchanges. India’s largest insurer and its promoter have until May 2027 to sell the remaining 6.5% of shares.

According to CNBC-TV18, the government could look to divest between 2.5% and 3% of its total equity in LIC through an Offer for Sale (OFS) process. Citing sources, the broadcaster reported that the OFS could begin within the next two weeks. Motilal Oswal and IDBI Capital have reportedly been appointed as merchant bankers to manage the process.

The report adds that this would be the first tranche of LIC’s OFS, with the government set to undertake investor roadshows over the next fortnight to gauge interest and finalise pricing. Final decisions on the size of the tranche and its pricing will be taken after these roadshows.

Shares of the insurer closed down 3.5% at ₹884.30 on the BSE today. The OFS could fetch the government between ₹14,000 crore and ₹17,000 crore, depending on the pricing. The Centre has set a ₹47,000 crore disinvestment target for FY26.

Why Sell LIC Stakes

The government, through the President of India, holds a 96.5% stake in LIC. During its IPO in May 2022, it sold 3.5% of its total equity.

Under Sebi’s Minimum Public Shareholding (MPS) requirement, all listed companies in India must maintain at least 25% public shareholding. However, last year, the government extended the compliance deadline for PSUs, including central public sector enterprises (CPSEs) and public sector banks, to 2026.

In 2023, the Finance Ministry granted LIC a one-time exemption to meet the 25% MPS by May 2032 under SCRR Rule 19A(6). Separately, in May 2024, Sebi extended the deadline for LIC to achieve 10% public shareholding to 16 May 2027 under SCRR Rule 19(2)(b)(iv), giving the corporation three additional years from the original timeline.

Earlier this month, LIC reported a 5% year-on-year rise in Q1 profit to ₹10,987 crore, aided by higher renewal premiums and an improved product mix that boosted margins. Net premium income grew nearly 5% to ₹1.19 lakh crore, while the value of new business jumped 20.75%, with margins improving to 15.4%.