Shares of Life Insurance Corporation of India (LIC) experienced a 4% decline in Wednesday's trading after reports emerged suggesting the Indian government is planning to offload a portion of its stake in the country's largest life insurer.
According to reports, the government, which currently holds a 96.50% stake in LIC, intends to sell a 2% stake to institutional investors. This move is anticipated to occur by the end of June or early July and is estimated to generate approximately Rs 10,000 crore.
Details of the Proposed Stake Sale
The formal marketing for the stake sale is reportedly slated for June. This development comes amidst a period where Dalal Street has witnessed several other offer-for-sale (OFS) issues, including those from Coal India and Central Bank of India, primarily aimed at meeting minimum public shareholding norms mandated by SEBI.
Following the news, LIC's stock dropped 4.22% to a low of Rs 819.05 per share on the BSE. The company's market capitalization stood at Rs 5,25,164.56 crore.
Context of Public Shareholding Norms
Indian regulations require listed companies to maintain a minimum of 25% public shareholding. Recent government OFS issues, such as the one for Coal India (where the government plans to sell up to 2% of its 63.13% stake) and Central Bank of India (up to 8% of its 89.27% stake), reflect efforts to comply with these norms.
Analyst Outlook on LIC
Despite the recent dip, some analysts maintain a positive outlook on LIC. ICICI Securities commented that the current discounted valuation is unwarranted. While acknowledging near-term tailwinds from higher volumes, the firm noted potential longer-term risks, including adverse regulatory changes.
Emkay Global reiterated a 'BUY' rating on LIC, increasing its March 2027 target price by 10% to Rs 1,100. The firm highlighted management's focus on growing absolute Value of New Business (VNB) and anticipated consolidation in the product mix. Emkay Global revised its APE estimates by 4-5% and VNB margin estimates by 200-240 basis points, projecting a 15-16% increase in VNB over FY27-28E.