The department of investment and public asset management (Dipam) on Monday sought bids from merchant bankers and legal advisers for minority stake sales by the government in select public sector banks (PSBs) and financial institutions, including Life Insurance Corporation (LIC), in the next three years.
The last date for bidding by interested bankers and legal advisers is March 27. The advisers would be empanelled for three years to assist the government in the minority stake sales of PSBs and financial institutions.
The move assumes importance as the Centre will likely sell small stakes in LIC and up to five PSBs to help them meet the minimum public shareholding (MPS) norms of the Securities and Exchange Board of India (SEBI).
The purpose of empanelment is to have the bankers and legal advisers for the financial sector just as Dipam has empanelment for the central public sector enterprises (CPSEs), sources said.
In May 2024, SEBI gave three more years or till May 16, 2027, to LIC to achieve a minimum public shareholding of 10%. The SEBI norm mandated listed firms to have a minimum 10% public holding within two years of listing. The public float in LIC is just 3.5% after the government sold the stake in May 2022 to raise Rs 20,516 crore.
Even though LIC is a large-cap company with a market capitalisation of close to Rs 5 lakh crore, it is not part of the benchmark indexes — S&P BSE Sensex or Nifty 50. So, the government could initially sell at least another 1.5% stake in LIC to make the stock eligible to be part of index funds to attract a larger long-term investor pool.
Inclusion in index funds, which track a particular set of companies, will create a larger pool of investor base for LIC and make it easier for the government to dilute further stakes to meet the minimum public shareholding (MPS) norm of 25%. Given the volatility in the share price of LIC after listing in May 2022, the government has given a 10-year window since listing for the insurance behemoth to meet the MPS norm.
Similarly, the Centre may disinvest minority stakes in five PSBs if they fail to comply with the 25% MPS norm by raising fresh capital from the market. The public holding in Punjab & Sind Bank is just 1.75%, followed by Indian Overseas Bank (3.62%), Central Bank of India (6.92%), UCO Bank (4.61%) and Bank of Maharashtra (20.4%). Similarly, the government is expected to dilute stake in New India Assurance with public holding at 14.56% and GIC Re with a public holding of 17.6%.
