Life Insurance Corporation of India bought a majority of shares in a 5 percent stake sale worth $730 million by power utility NTPC Ltd.
Although LIC ended up buying 59 percent - or 243.15 million of the 412.27 million shares on offer - overall institutional demand, including that from foreign investors, was strong with bids worth 2-1/2 times the shares on offer, according to a Reuters review of exchange filings.
But retail investors ended up buying only 44 percent of the shares allotted to them.
The sale of NTPC shares was part of India's asset sales program, which is crucial to contain the government's budget deficit. The sale came just days before the government is due to unveil its fiscal budget for 2016-17 on Monday.
LIC's stake in NTPC has increased to 12.98 percent after the government stake sale, according to an exchange filing by the insurer.
The insurer did not immediately reply to an email seeking comment.
LIC is India's biggest portfolio investor and plays a major role in government stake sales, and had previously also stepped in when demand was weak.