The Offer-for-Sale (OFS) of Life Insurance Corporation of India (LIC) shares has commenced for retail investors today, Wednesday, August 5. This follows an enthusiastic response from institutional investors on the first day of bidding, which saw the issue oversubscribed 3.32 times.
The Government of India, holding a majority stake in the state-run insurance giant, confirmed its decision to exercise the entire greenshoe option. This move increases the total stake on offer to 6.5%, up from the initial 2.5%, aiming to raise approximately Rs 31,000 crore for the government's disinvestment program.
Institutional Response Fuels Greenshoe Option
The Department of Investment and Public Asset Management (DIPAM) Secretary Arunish Chawla reported that the institutional portion of the LIC OFS was met with overwhelming demand on Tuesday, August 4. This strong institutional interest prompted the government to utilize the full 4% greenshoe option, adding to the initial 2.5% stake.
The floor price for the OFS was set at Rs 382 per share, representing a significant 10% discount compared to LIC's closing price of Rs 424.35 on Monday, August 3. Retail investors are eligible for an additional Rs 10 discount over the final determined price, providing a further cushion.
Expert Views: To Subscribe or Not?
Market experts offer mixed opinions on whether retail investors should participate in the LIC OFS:
- Mahesh M. Ojha, VP of Research at Kantilal Chagganlal Securities, suggests that retail investors could consider subscribing with a 9-12 month investment horizon. He noted, "The downside seems to be limited and retail investors will get a Rs 10 discount over the determined final price, which gives further cushion. The undervaluation of the counter make it a decent bet for investors."
- Sanjit Singh Paul, Managing Partner at Modular Capital, echoed a similar sentiment, stating that the LIC stock is "fundamentally undervalued and has good potential to rise along with the market." He added that despite weak gross profit margins, the company remains profitable and offers good dividends, making it a "decent value pick."
- Conversely, Gaurav Sharma, Head of Research at Globe Capital Market, expressed caution. In an interaction with Business Today TV, Sharma highlighted that LIC shares have consistently failed to generate positive returns for investors since its initial public offering (IPO). He advised investors to consider exiting the LIC counter at an opportune time and explore the Asset Management Company (AMC) space within the insurance sector instead.
Understanding LIC's Stake Sale
The government currently holds a 96.5% stake in LIC. Upon the successful completion of this OFS, its shareholding is projected to decrease to 90%. This reduction is in line with the minimum public shareholding (MPS) norms mandated by market regulator SEBI, which had granted LIC time until May 2027 to comply.
It is worth noting that the government previously diluted a 3.5% stake in LIC through its IPO in May 2022, which was priced between Rs 902-949 per share and raised approximately Rs 21,000 crore. However, after the stock traded ex-date for bonus in May 2026, the effective IPO price adjusted to Rs 474.5 per share. The stock currently trades nearly 18% below its effective IPO price.