LIC shares tank 4% on report govt may sell stake next month: Key details

Shares of Life Insurance Corporation of India fell 4 per cent in Wednesday's trade amid a report suggesting that the government, which held a 96.50 per cent stake in the country's largest life insurer, was planning to sell a 2 per cent stake to institutional investors by June-end or early July. The report came as Dalal Street witnessed a couple of offer-for-sale (OFS) issues, including that of Coal India, which is currently underway, and Central Bank of India last week, aimed at meeting minimum public shareholding norms.

As per Bloomberg, a formal marketing is planned for June, with people familiar with the matter suggesting Rs 10,000 crore stake sale. Following the development, the LIC stock fell 4.22 per cent to hit a low of Rs 819.05 apiece on BSE. LIC commanded a market capitalisation of Rs 5,25,164.56 crore. The stake sale estimate hinted at a likely 2 per cent stake sale. 

In the case of Coal India the government, which owned 63.13 per cent stake, plans to sell up to 61,627,283 shares in state-owned coal mining firm, as a base offer size. This represents 1 per cent of the total paid-up equity share capital of Coal India. In the case of oversubscription, the government intends to sell an additional 61,627,283 equity shares, representing another 1 per cent of the total issued and paid up equity share capital. 

Listed companies in India are required to meet 75 per cent minimum public shareholding to comply with SEBI norms. The norms mandate listed companies to maintain at least 25 per cent public shareholding.

Central Bank of India, where government held 8,08,03,91,687 shares, or 89.27 per cent stake, announced up to 8 per cent stake sale last week.

LIC target prices
On LIC stock, ICICI Securities said deeply discounted valuation is unwarranted. Higher volumes pose near-term tailwinds while longer-term risk includes any adverse regulations, it said.

"Going forward, while the corporation will see consolidation with respect to its product mix, the management remains focused on growing the absolute VNB. To bake in the Q4 developments, we increase our APE estimates by 4-5 per cent while raising our VNB margin estimates by 200-240bps; this results in 15-16 per cent increase in VNB over FY27-28E. We maintain BUY on LIC and increase Mar-27E TP by 10 per cent to Rs1,100 (from Rs1,000)," Emkay Global said.