Life Insurance Corporation (LIC) may require at least five more years to comply with the minimum public shareholding of 25 per cent beyond the current exempted timeline of 2027.
Formal communication in this regard had been shared recently with the finance ministry, underlining LIC’s roadmap, plans of further dilution of stake, current norms around public float, and challenges ahead, a government source familiar with the matter said.
“Going forward, we will have to take a call, along with Sebi (Securities and Exchange Board of India) and the Department of Economic Affairs on the roadmap for minimum public shareholding (MPS). This could be done keeping market acceptance in mind,” he said. Currently, the government holds a 96.5 per cent stake in LIC.
Sources said that the government has decided to sell the stake in tranches where it could dilute a smaller portion. Any decision on further dilution of stake would be taken after considering the market situation in view of a global slowdown and domestic factors. The process would take longer than the given timeline and may need five to seven more years to meet the requirement, the official cited above said.
For issuers with a post-issue market capitalisation of over Rs 1 trillion, Sebi had in 2021 eased the deadline for a 25 per cent MPS to give five years. This was done to facilitate the IPO of LIC.
“For issuers with a post-issue market capital exceeding Rs 100,000 crore, the requirement of minimum public float will be reduced from 10 per cent of post-issue market capital to Rs 10,000 crore plus 5 per cent of the incremental amount beyond Rs 100,000 crore. These issuers shall be required to achieve at least 10 per cent public shareholding in two years and at least 25 per cent public shareholding within five years from the date of listing,” Sebi had said, while tweaking the rule in 2021.
Earlier this year, the government notified that it can now exempt any listed public sector enterprise from the MPS norm, which mandates at least a 25 per cent public float for all listed entities.
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The finance ministry also apprised about the non-deal roadshows by the LIC management, along with Dipam ((Department of Investment and Public Asset Management) and shared the feedback they received from foreign investors, another person said. They held an international roadshow in several jurisdictions, including Hong Kong and Singapore, and showcased the business prospects of the insurance behemoth.
Sources said that Dipam would initiate the second round of the stake sale exercise in the next financial year, after the Lok Sabha election. The government is expected to sell a 2 per cent stake in the next round.
Last year, the government raised Rs 20,557 crore by diluting its 3.5 per cent stake in LIC through the country's biggest-ever IPO. LIC shares were listed on May 17, 2022, at a discount of 8.62 per cent at Rs 867.20 apiece on the BSE over the issue price of Rs 949 a share. The government sold over 221.3 million shares. The price band of the issue was Rs 902-949 a share. However, shares were allocated to investors on May 12, 2022, at the upper end of the price band.