Even Its Own Bankers Didn't Know: Inside Govt's ₹31,552 Cr LIC Stake Sale

The government kept the sale of its Life Insurance Corporation shares such a closely guarded secret that even the bankers advising on the deal were not told when it would launch, until hours before it did.

The strategy helped India pull off its biggest-ever secondary share sale through a stock exchange, raising ₹31,552 crore, more than double its original target, according to a Bloomberg report.

Officials in the state divestment department withheld the launch date to stop traders from taking positions ahead of the sale that could push LIC's stock price down before the government could sell its shares, the report said. Even the four banks advising on the transaction were not informed at the same time. The 6.5% Offer for Sale (OFS) of the LIC was managed by a consortium of merchant banking advisors, IIFL Capital Services, BNP Paribas Securities India, Goldman Sachs India and Motilal Oswal Investment Advisors.

Notably, one banker learned of the launch only shortly before the news reached the stock exchanges on Monday, the report added.

Hours before the sale opened, one of the advising bankers was summoned to the divestment department's office in New Delhi without being told why. Only on arrival did officials reveal that the LIC stake sale would begin that evening, and asked the banker to immediately prepare the exchange filing. The remaining advisers were brought in only after markets closed for the day, the report said.

No Fees, No Signals

None of the four advisers charged a fee for the deal. During the request-for-proposal process, one investment bank had agreed to work for free, which eventually led all four to forgo their fees, the report added. Indian investment banks often accept only symbolic fees on government-linked deals, in exchange for prestige and long-term relationships.

The government also moved up the timing. Most market participants had expected the sale only after LIC's quarterly earnings, due Thursday. Officials chose to launch earlier instead, calculating that keeping investors uncertain about timing would help keep the stock price stable, the report said.

Investors Respond Strongly

Following its bankers' advice, the government sold an initial 2.5% stake, keeping an option to raise it by another 4% if demand was strong. The smaller base offering was meant to improve the odds of full subscription, seen as an important signal to large investors.

The bet worked. The base portion was subscribed 3.32 times by institutional investors on Tuesday, prompting the government to exercise the oversubscription option. The retail portion, which closed Wednesday, was subscribed 69%. Overall, the offering was subscribed 1.2 times, according to stock exchange data.

With this sale, LIC's public shareholding will rise to 10%, meeting the market regulator's threshold well ahead of the May 2027 deadline.