Govt Will Sell 25% Stake In LIC To Private Investors Via Mega LIC IPO Of Rs 11 Lakh Crore
In a shocking development, we have received news that there is a possibility that the initial public offering of the LIC India would emerge to be much bigger than what was estimated.
The IPO of LIC was announced by the Financial Minister, Nirmala Sitharaman, so that the Government would achieve its disinvestment target of Rs 2.1 lakh crore in the financial year 20-21.
The employees of LIC were not very happy with the government’s decision to sell its stake in LIC via IPO and had also gone on a strike against the move, back in February 2020.
Government To Sell Off 25% Stake In LIC; Only 10% Was Planned Initially
Sources close to the development have revealed that there is a proposal to sell off up to 25 percent stake in one or more tranches in the Life Insurance Corporation of India (LIC), which is the largest state-run insurer in entire India.
The sources revealed, “The Department of Financial Services under the finance ministry has floated a draft Cabinet note for stake sale in LIC to the ministries concerned, SEBI, IRDA, and NITI.”
Initially, the government planned to sell off only 10 percent of LIC, which has now been hiked to 25 percent. Reports suggest that the sale of stakes will begin with the sale of 10percent and the remainder of the sale of stakes will be conducted in more than one tranches.
The reason behind this is the rule of capital markets regulator SEBI, which states that within three years of listing, the minimum public shareholding is recommended to be at least 25 percent.
The coronavirus pandemic unexpectedly put a dent in the Government’s plans of disinvestment and the government is now hopeful that the LIC IPO will be helpful to get them up to speed.
Bonus And Discounts For Retail Investors And LIC Employees
This comes as good news for retail investors as the government is also looking to include a bonus and discount for them.
Another source said that the proposal talks about the dilution of government shareholding from 100 percent to 75 percent in LIC in one or more tranches.
Reports have suggested that the government might offer incentives to retail investors by applying a discount of 10 percent, which might also be extended to the employees of LIC.
Bonus shares might also be offered in the initial days of the stake sale.