The government is carefully evaluating the follow-on public offering (FPO) of Life Insurance Corporation (LIC) and is keen on having the “best people” to execute the stake sale, a senior finance ministry official told Business Today TV.
The official described the latest move to empanel merchant bankers and legal advisers for minority stake sales in LIC and public sector banks (PSBs) as “firm steps in the right direction.” However, he added that the timing of LIC’s stake sale would be decided based on “the right market conditions.”
In an effort to optimize the government selection for the LIC FPO success, Dipam, the Department of Investment and Public Asset Management, has invited bids from financial and legal advisers for a three-year empanelment to assist with stake sales in LIC and select PSBs. This strategic move is crucial as the Centre is likely to sell a small stake in LIC to help meet the minimum public shareholding (MPS) norms set by SEBI.
Currently, LIC has a public float of just 3.5%, which is significantly below the 10% minimum required for listed firms within two years of listing. SEBI has extended the deadline until May 2027, providing the government with more time to strategize its divestment plans. Holding a 96.5% stake in LIC, sources indicate that an additional 3-5% stake sale in LIC could be the first step in 2025-2026.
The government’s decision to carefully select the right team of experts for the LIC FPO showcases a commitment to ensuring the success of this crucial financial transaction. With the previous success of the Rs 21,000 crore raised through LIC’s initial public offering (IPO) in May 2022, the government is now focusing on leveraging that momentum for the upcoming stake sale.
The IPO in May 2022 was a historic moment for India’s primary markets, with the government raising Rs 21,000 crore through an offer-for-sale of 221,374,920 equity shares of Rs 10 each, priced at Rs 949 per share. This offering represented 3.5% of LIC’s paid-up capital and set the stage for future divestments in the insurance giant.
As the government prepares for the next phase of divestment in LIC through the FPO, the careful selection of financial and legal advisers underscores the importance of having the right expertise and guidance in place. By empanelling experts with a deep understanding of the financial markets and legal frameworks, the government aims to navigate the complexities of stake sales with precision and efficiency.
With the upcoming stake sale in LIC expected to play a crucial role in meeting SEBI’s MPS norms and unlocking value for investors, the government’s focus on optimizing the selection process for its advisors signals a proactive approach to financial management. As the financial landscape evolves and market conditions fluctuate, having a strong team of experts by its side will be essential for the government to make strategic decisions that benefit both LIC and its stakeholders.
