Government Plans to Sell 6.5% Stake in LIC in Tranches

In a bid to meet the Securities and Exchange Board of India’s (SEBI) minimum public shareholding (MPS) requirement, the Indian government is set to begin a phased divestment of its stake in the Life Insurance Corporation (LIC) of India. The plan is part of a larger effort to regularise ownership patterns across Central Public-Sector Enterprises (CPSEs) and encourage broader retail investor participation.

LIC Disinvestment Strategy Unfolds

The Centre has announced its intention to divest a 6.5% stake in LIC over the next 24 months. Arunish Chawla, Secretary of the Department of Investment and Public Asset Management (Dipam), told Business Standard, “This year, we will follow a strategy of regular offers for sale (OFS) in small tranches. We are officially giving forward guidance for small investors to look out for it.”

LIC was listed in May 2022 with a 3.5% dilution of the government's stake. SEBI has allowed the insurer to raise its public shareholding to 10% by 16 May 2027. According to current market valuations, a 6.5% dilution is expected to yield ₹35,256 crore for the exchequer.

“We will do this (LIC) disinvestment in small tranches, keeping in mind the liquidity conditions and the need to give small investors a fair chance to participate,” the secretary further stated.

MPS Targets for CPSEs and Public Banks

Most CPSEs are already compliant with SEBI’s requirement of at least 25% public shareholding for listed firms. However, some entities in sectors such as defence, railways, and finance are yet to meet this mandate.

“We are actively pursuing their disinvestment. Hopefully, within the next year, we would like them to achieve MPS norms,” Chawla said.

In the banking sector, five public-sector banks, including Bank of Maharashtra and UCO Bank, have a deadline of August 2026 to comply with the 25% threshold. The broader disinvestment programme for this financial year is aimed at ensuring these norms are fulfilled in a structured and timely manner.

Read More: NSE Denies News Reports on IPO Talks with Government

Conclusion

The government’s phased approach to divestment, particularly in LIC, signals a renewed commitment to enhancing market participation and governance standards in public enterprises. As the Centre accelerates disinvestment efforts across key sectors, it remains focused on achieving regulatory compliance while fostering inclusivity for small investors.

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