Government Considers Further Stake Sale in LIC Next Year

The Indian government is exploring a fresh move to reduce its ownership in the Life Insurance Corporation of India (LIC). A senior official indicated on Monday that a follow-on public offering (FPO) could be launched in the next financial year, starting April 2025.

Plans for a Follow-On Public Offering

Financial Services Secretary M Nagaraju stated that the government is actively considering further reducing its stake in the insurance behemoth. The method under discussion is a Follow-On Public Offer (FPO). This would allow the government to sell more of its shares in LIC to public and institutional investors. The move would follow the company’s massive initial public offering (IPO) in May 2022.

An FPO is a standard mechanism for a company already listed on stock exchanges to raise fresh capital or for a major shareholder, like the government, to sell its existing shares. This differs from an IPO, which is a company’s first sale of stock to the public. The government’s goal is to raise funds for the national budget and increase public participation in the country’s largest life insurer.

Background: The Landmark LIC IPO

LIC’s debut on the stock market was India’s largest-ever IPO. The government raised approximately 21,000 crore rupees by selling a 3.5% stake. This began the process of diluting the government’s century-old full ownership. Despite the IPO’s size, the government retained about 96.5% ownership in the insurer post-listing.

The stock’s performance after listing has been closely watched by millions of policyholders and investors. The share price faced volatility, trading below its issue price for an extended period before recovering in recent months. A potential FPO is seen as a next step in the long-term plan to meet disinvestment targets and improve the stock’s liquidity and free float in the market.

Implications for Investors and the Market

A second public offering for LIC would be a significant event for Indian equity markets. It would provide another opportunity for investors to buy into the iconic insurer, which commands a massive market share in India’s life insurance sector. The success of such an offering would depend on market conditions, investor sentiment, and LIC’s financial performance in the coming quarters.

For the government, it represents a continued commitment to its disinvestment program. Selling stakes in large public sector enterprises helps raise non-tax revenue for funding infrastructure and social programs. It also aligns with a broader policy of reducing the state’s role in commercial businesses and improving corporate governance.

Analysts suggest that any future offering would need careful timing and pricing to attract strong demand. The government and LIC management would also likely emphasize the company’s digital transformation efforts and its strategy to protect market share amid rising competition from private insurers. Any official proposal for an FPO would require approvals from the government and market regulators before launch.