New Delhi. The government is gradually selling its stake in the country's largest insurance company Life Insurance Corporation (LIC). After bringing the IPO of LIC 2 years ago, the government has once again prepared to sell 2 to 3 percent stake. In such a situation, the question arising in the minds of investors is why the government is selling its stake in this company.
In fact, under SEBI rules, the central government has to reduce its stake in LIC by 10 percent by May 2027, which will have to be issued as a public issue. In such a situation, there is a plan that by 2025-26 the government will have to bring 10 percent of the company's stake in the market. It is believed that the government will not sell this entire stake at once, but it will be sold in many small parts. This will not cause much hindrance in the market. At present, the government is waiting for the market to improve.
What is the current stake?
The central government currently holds 96.5 per cent stake in LIC. In May 2022, 3.5 per cent equity was sold to the public. The company raised Rs 21,000 crore through this IPO. The government is once again preparing to sell up to 3 per cent stake. With this, the government can raise Rs 9,500 crore to Rs 14,500 crore. This estimate is based on LIC's current market capitalization of around Rs 4.8 lakh crore.
SEBI made the rule
The Securities and Exchange Board of India (SEBI) had initially directed LIC to meet the minimum public shareholding rule of 10 percent by May 2024. However, this deadline has been extended to May 16, 2027, giving the government additional time to implement its disinvestment strategy. The government will now have to sell 6.5 percent stake in the company, only then SEBI rules can be followed. In such a situation, it is believed that the government will reduce its stake to 90 percent in 2 times.
The company's valuation has declined
The market value of LIC has declined significantly since its listing. Its market capitalization was Rs 5.5 lakh crore in May 2022, which has now come down to Rs 4.8 lakh crore. In this way, the company has suffered a loss of about Rs 70 thousand crore. Weak investor sentiment and external market challenges have further affected LIC shares, which were trading at Rs 754.10 on the BSE on Tuesday.
