Government plans to decrease Stake in LIC, Know all Details about Privatisatio

There is a big news related to divestment of Government stake in LIC. After Banks, now Government is planning to reduce stake in Insurance companies. As per sources, the Government is planning to reduce stake in LIC via OFS (Offer for Sale). 

LIC, the country’s largest life insurer, became a publicly listed company over three years ago. However, a large majority of its shares are still held by the Government of India, meaning that only a small portion of LIC’s shares are available for trading in the stock market — a situation known as low free float

Government Still Holds 96.5% Stake

As of the end of March 2025, the government continued to hold a 96.5% stake in LIC — the same level as when the company was listed on the stock exchange through its ₹21,000 crore IPO in 2022, where it sold only 3.5% of its shares. Out of the current 3.5% public shareholding:

• Mutual funds hold about 1.13%
• Retail investors (those investing up to ₹2 lakh) — around 23 lakh shareholders — hold 1.67%

According to rules set by SEBI (Securities and Exchange Board of India), listed companies must have at least 25% public shareholding. LIC is currently 21.5% short of this minimum requirement.

Government May Earn ₹6,000 Crore per 1% Stake Sale

Based on current market prices, the excess 21.5% government stake in LIC is valued at approximately ₹1.28 lakh crore. This means that for every 1% stake sold, the government could earn nearly ₹6,000 crore.

SEBI Sets 2027 Deadline

In May 2024, the Securities and Exchange Board of India (SEBI) granted Life Insurance Corporation (LIC) an extended timeline until 2027 to raise its public shareholding to at least 10%, as required under SEBI’s listing rules.

Currently, LIC has a very low public float of only 3.5%, with the government still holding 96.5% of the company’s shares. According to SEBI’s norms, all listed companies must maintain a minimum public shareholding to ensure better liquidity, price discovery, and investor participation in the market.

To help meet this target, the latest approval for an Offer for Sale (OFS) by the government is being seen as an important step. Through the OFS route, the government can gradually reduce its stake in LIC by selling shares to institutional and retail investors via the stock exchange.

This move will not only help LIC move closer to the 10% public shareholding mark, but also improve its visibility and participation in the stock market. It may also boost investor confidence and lead to better valuation of LIC shares in the long term.

More such stake sales may follow in the coming months as LIC works toward complying with SEBI’s requirements before the 2027 deadline.