The government on Tuesday decided to sell an additional 4% stake in Life Insurance Corporation of India (LIC) in the ongoing offer for sale (OFS), after the issue was subscribed 3.3 times on the opening day, according to Business-Today. Including the green shoe option, the total offer size rises to 82.2 crore shares, expected to mop up about Rs 31,400 crore at the base price of Rs 382 per share — making it the largest ever OFS in the Indian market, the report said.
Fiscal impact and disinvestment receipts
The OFS is a central piece of India's disinvestment programme for the current fiscal year. Officials told Business-Today that over Rs 28,000 crore has already been mopped up from the LIC offer, taking total disinvestment receipts for the fiscal year to Rs 50,000 crore against the full-year target of Rs 80,000 crore, excluding asset monetisation, which has generated a little over Rs 6,000 crore so far. For CFOs and treasury professionals tracking Indian sovereign finances, the scale of the offer signals the government's reliance on equity-market monetisation of state assets to meet its budget math.
Largest-ever OFS in India
The base offer was for 31.6 crore shares, translating to 2.5% of LIC's equity capital. On Tuesday, backed by strong institutional demand, the government said it will sell an additional 50.6 crore LIC shares, taking the total offer size to 82.2 crore shares. DIPAM secretary Arunish Chawla said in a social media post:
This enthusiastic participation reflects robust investor confidence and the depth of India's capital markets. In view of the exceptional demand, govt has decided to exercise the green shoe option. Retail investors get to bid tomorrow (on Wednesday). Make the most of this opportunity.
| Offer detail | Base offer | With green shoe |
|---|---|---|
| Shares on offer | 31.6 crore | 82.2 crore |
| Equity capital (%) | 2.5% | ~6.5% (additional 4%) |
| Expected proceeds at Rs 382 | — | ~Rs 31,400 crore |
| Proceeds at NSE indicative price of Rs 383.84 | — | ~Rs 31,600 crore |
Investor demand and market reaction
At the close of Tuesday's bidding, data from the NSE showed total demand for nearly 94.5 crore shares against the enlarged offer of 82.2 crore shares, according to Business-Today. The NSE indicative price for the offer stood at Rs 383.84 per share; if all 82.2 crore shares are sold at that price, the total offer size would be close to Rs 31,600 crore. Only non-retail investors were allowed to bid on the first day. On Wednesday, the closing day of the offer, retail investors will also be allowed to participate.
Retail reservation and share price movement
In the OFS, 8.2 crore shares, or 10% of the offer, are reserved for retail investors, and another 50 lakh shares are reserved for LIC's employees. Despite strong subscription demand, the stock closed nearly 8% lower at Rs 391 on the BSE on Tuesday, compared with the offer price of Rs 382, Business-Today reported. The discount to the issue price reflects the supply overhang created by bringing 82.2 crore additional LIC shares into the market, a factor that treasury desks and institutional investors will weigh when assessing the government's next disinvestment tranche.
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