The Centre may bring an offer for sale (OFS) in Life Insurance Corporation soon, which would increase the state-run insurer’s public float.
This follows LIC’s proposed issuance of bonus shares in a 1:1 ratio, which will make the offer affordable to larger sections of investors and boost liquidity, thanks to the lower per-share price.
The LIC Board on Monday said the proposed bonus issue is an appropriate way to reward members for their continued support and trust. It also helps bring a balance between LIC’s paid-up capital and accumulated reserves, while enhancing liquidity and marketability by making the shares more attractive to a broader range of investors.
An overview of LIC’s performance in market
After the government listed LIC in May 2022 by diluting a 3.5% stake, the stock traded below its IPO allotment price of Rs 949 per share, leaving investors largely unrewarded. Since listing, LIC shares fell as much as 44% to Rs 530 on March 29, 2023. However, the stock closed at Rs 804.25, up 0.71% on the BSE on Monday following the bonus announcement.
The government plans to sell a small stake in LIC in FY27 as it aims to gradually increase public float to meet the minimum public shareholding norm of 25%, sources said.
In May 2024, Sebi granted LIC an extension of three years, until May 16, 2027, to achieve a minimum public shareholding of 10%. Currently, public float stands at just 3.5% following the stake sale in May 2022, which raised Rs 20,516 crore.
The bonus issue could support a potential OFS by improving affordability and liquidity. By increasing the number of shares and reducing the per-share price, it may attract greater retail participation.