LIC shares tumble 8 pc as govt to sell 6.5 pc stake via Rs 31,000 crore OFS
New Delhi, Aug 4
Shares of Life Insurance Corporation of India plunged nearly 8 per cent on Tuesday after the government announced an offer for sale to reduce its stake in the state-owned insurer.
The PSU stock fell as much as 7.92 per cent to Rs 390.70 on the BSE, hitting an intraday low as of 10:40 am. At the last count, the stock was trading at Rs 397.80, down more than 6 per cent.
The selling pressure came after the government announced an OFS comprising a base offer of 2.5 per cent of LIC's paid-up equity share capital, along with a greenshoe option to sell an additional 4 per cent stake.
The government could raise up to Rs 31,000 crore through the sale of up to 6.5 per cent of LIC's equity if the greenshoe option is fully exercised.
Further weighing on investor sentiment was the OFS floor price of Rs 382 per share, which is about 11 per cent lower than LIC's closing price on Monday.
The stock remained under pressure during Tuesday's trade due to the discounted floor price and concerns over the large supply of shares entering the market.
The OFS opened on Tuesday for non-retail investors and will open on Wednesday for retail investors.
However, the stake sale is also a key step towards increasing LIC's public shareholding and complying with the Securities and Exchange Board of India's (SEBI) minimum public shareholding norms.
The government currently holds 96.5 per cent in LIC, leaving only 3.5 per cent with public shareholders. The government's stake will fall to 90 per cent if the entire 6.5 per cent offered under the base issue and greenshoe option is sold.
Under the minimum public shareholding requirements, SEBI has given LIC time until May 2027 to reduce the government's stake to 90 per cent.
— IANS
Reader Comments
I remember when LIC IPO launched, everyone was so excited. Now look at it - trading below issue price. Our government is just dumping shares to raise funds. Why should retail investors bear the brunt? Very disappointing for those who invested with hope.
This is actually a golden opportunity for long-term investors! The floor price at Rs 382 is attractive. LIC has such strong brand value in India - policyholders trust it. Once the OFS is over, the stock should stabilize. Buying the dip! 🚀
The problem is clear - government holds 96.5% stake. That's not good governance. They need to reduce to 90% by 2027 anyway, so why wait? But timing matters. Selling at these low levels hurts existing shareholders. Hope the FM explains the rationale better.
Interesting to see how Indian markets react to government disinvestment. In the US, government doesn't hold stakes like this. But LIC is special - it's an institution. The 8% drop seems like an overreaction to me. The fundamentals haven't changed overnight.
Actually this is a long-term positive! More public holding means better governance and liquidity. But yes, the 11% discount on floor price is concerning. Seems like the government is in a hurry. Let's watch the retail subscription tomorrow - that will tell us the real sentiment.
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