LIC offer for sale for retail investors on August 5: Analyst decodes the opportunity

Amid the ongoing Offer for Sale (OFS) of country's largest insurer LIC, BTTV spoke to Gaurav Sharma, Vice President & Head of Research, Globe Capital on how should retail investors approach the share sale. Sharma said the stock has not delivered any material value for its investors.The stock listing was a clear hype, which faded out.

He advised investors to get out of LIC counter and pick AMC stocks which he said are better bets than the insurance stocks.

The government has launched an Offer for Sale (OFS) to reduce its stake in Life Insurance Corporation of India (LIC) by up to 6.5%, setting a floor price of Rs 382 per share as it moves to accelerate compliance with minimum public shareholding requirements.

The OFS opened for institutional investors on August 4, while retail investors can participate on August 5. The issue comprises a base offer of 2.5% of LIC's equity, with the government retaining the option to sell an additional 4% stake through a greenshoe option if investor demand is robust.

Investors will not be allowed to place bids below the floor price of Rs 382 per share. The final issue price will be determined through the book-building process based on demand received during the two-day bidding period.

Following LIC's landmark initial public offering in May 2022, in which the government divested a 3.5% stake, the Centre continues to hold a 96.5% stake in the insurer. Under Securities and Exchange Board of India (SEBI) regulations, LIC is required to increase its public shareholding to at least 10% by May 2027, with a longer-term requirement of achieving a 25% public float.

The latest stake sale marks another step towards meeting those regulatory milestones while enhancing the stock's free float and improving liquidity in the secondary market.

Meanwhile, LIC shares ended 7.86% lower at Rs 391 on Tuesday against the previous close of Rs 424.35. Market cap of the state owned firm crashed to Rs 4.94 lakh crore.

The stock is down 34% for up to two years. It slipped 125 in a year and fell 9% this year.