The Indian Government is thinking about selling up to 5% of its stake in Life Insurance Corporation of India (LIC) during this financial year. This move is aimed at gradually meeting the minimum public shareholding (MPS) requirements. Right now, government has 96.5% stake in LIC.
Background of LIC’s IPO
In May 2022, the government raised ₹21,000 crore by launching an initial public offering (IPO) for LIC, India’s largest life insurance company. This IPO was the biggest in the history of Indian capital markets. It involved the government selling 221,374,920 equity shares, each priced at ₹949, which represented 3.5% of LIC’s paid-up capital.
Current Stake and Future Plans
Currently, the government holds a 96.5% stake in LIC. They are now exploring options like a follow-on public offer (FPO) or qualified institutions placement (QIP) to sell a small part of this stake. Selling shares through these methods could potentially bring in higher returns due to the current stock price.
On December 20, 2023, the Department of Economic Affairs granted LIC a one-time exemption to achieve 25% public shareholding within 10 years from the listing date, extending the deadline to May 2032. Additionally, on May 14, 2024, the Securities and Exchange Board of India (SEBI) provided LIC an extra three years to reach 10% public shareholding, setting a new deadline of May 16, 2027.
Strategic Disinvestment
To maximize the financial return within these timelines, the government plans to sell its stake in small portions. Sources indicate that this piecemeal approach is intended to ensure the best possible valuation.
LIC’s Future Plans and Performance
Siddhartha Mohanty, the CEO and Managing Director of LIC, emphasized the company’s focus on profitable growth and value creation for all stakeholders. He mentioned that while the total premium growth was stable last year, LIC aims to boost its market share by deploying all necessary resources.
LIC has also launched a project called Digital Innovation and Value Enhancement (DIVE) to improve the digital experience for all stakeholders, from onboarding to claim settlements.
As of the end of FY2024, LIC held a market share of 58.87% in premiums and 69.91% in the number of policies.
Current Stock Performance
LIC’s shares have been trading on the stock exchanges since May 17, 2022. The share price of LIC as on today is given below.
In conclusion, the government’s planned stake sale in LIC is a strategic move to meet public shareholding norms while maximizing returns. LIC’s ongoing initiatives and stable market position highlight its commitment to growth and stakeholder value.