Govt exercises LIC OFS green shoe option after institutional book sees 3.32x subscription

The government on Tuesday exercised the green shoe option in the Offer for Sale (OFS) of Life Insurance Corporation of India (LIC) after the institutional investor portion of the issue was oversubscribed 3.32 times, expanding the size of the stake sale ahead of the retail bidding window on Wednesday.

In a post on X, Department of Investment and Public Asset Management (DIPAM) Secretary Arunish Chawla said the institutional investor portion of the OFS was oversubscribed 3.32 times from its base size, reflecting "robust investor confidence and the depth of India's capital markets". He added that the government had decided to exercise the green shoe option in view of the exceptional demand.

The Centre had launched the OFS on Monday, offering to divest a 2.5% stake in LIC with an additional 4% stake under the green shoe option. The floor price has been fixed at ₹382 per share, an around 11% discount to Monday's closing price of ₹428.50 on the NSE. The OFS opened for non-retail investors on Tuesday, while retail investors can bid on Wednesday.

If the entire 6.5% stake is sold, the government is expected to raise about ₹31,400 crore, making it one of the largest stake sales by value since LIC's listing in 2022. The proceeds will also provide a significant boost to the Centre's FY27 disinvestment programme, under which it aims to raise ₹80,000 crore through stake sales and asset monetisation.

A fully subscribed issue will also increase LIC's public shareholding to 10% from the current 3.5%, allowing the insurer to meet SEBI's minimum public shareholding (MPS) requirement well ahead of the May 16, 2027 deadline. SEBI had granted LIC additional time to achieve the 10% public float after the insurer was listed with a 3.5% public shareholding in May 2022.

While meeting the 10% threshold would remove the immediate regulatory overhang, LIC would still need to undertake further stake dilution in the future to eventually comply with the broader 25% minimum public shareholding norm applicable to listed companies, unless regulators provide further relaxations.

Analysts said the higher public float would improve liquidity in the stock and enhance institutional participation over the long term, even though the discounted OFS weighed on LIC shares in the near term.

LIC shares ended 8.68% lower at ₹391.30 apiece on the NSE on Tuesday after the government exercised the green shoe option following robust institutional demand for the OFS. The stock, which had settled at ₹428.50 on Monday, hit an intraday low of ₹388.80 before recovering some losses by the close. The OFS floor price has been set at ₹382 per share, which is a discount of about 11% to Monday's closing price.