New Delhi, Aug 4 (IANS) Shares of Life Insurance Corporation of India (LIC) plunged nearly 8 per cent on Tuesday after the government announced an offer for sale (OFS) to reduce its stake in the state-owned insurer.
The PSU stock fell as much as 7.92 per cent to Rs 390.70 on the BSE, hitting an intraday low as of 10:40 am. At the last count, the stock was trading at Rs 397.80, down more than 6 per cent.
The selling pressure came after the government announced an OFS comprising a base offer of 2.5 per cent of LIC’s paid-up equity share capital, along with a greenshoe option to sell an additional 4 per cent stake.
The government could raise up to Rs 31,000 crore through the sale of up to 6.5 per cent of LIC’s equity if the greenshoe option is fully exercised.
Further weighing on investor sentiment was the OFS floor price of Rs 382 per share, which is about 11 per cent lower than LIC’s closing price on Monday.
The stock remained under pressure during Tuesday’s trade due to the discounted floor price and concerns over the large supply of shares entering the market.
The OFS opened on Tuesday for non-retail investors and will open on Wednesday for retail investors.
However, the stake sale is also a key step towards increasing LIC’s public shareholding and complying with the Securities and Exchange Board of India’s (SEBI) minimum public shareholding norms.
The government currently holds 96.5 per cent in LIC, leaving only 3.5 per cent with public shareholders. The government’s stake will fall to 90 per cent if the entire 6.5 per cent offered under the base issue and greenshoe option is sold.
Under the minimum public shareholding requirements, SEBI has given LIC time until May 2027 to reduce the government’s stake to 90 per cent.
–IANS
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