The Union government is set to exercise the green-shoe option under the ongoing offer for sale (OFS) of Life Insurance Corporation of India (LIC), increasing the total stake offered for sale to 6.5 per cent, according to reports. The move is part of the Centre’s efforts to raise LIC’s public shareholding and meet regulatory requirements for listed companies.

The initial OFS includes a base offer of 2.5 per cent equity in LIC, while the additional 4 per cent stake will be sold through the green-shoe option. The government currently holds around 96.5 per cent ownership in the insurance company, with public investors holding approximately 3.5 per cent. If the entire 6.5 per cent stake is sold, LIC’s public shareholding would increase to 10 per cent.

The stake sale has been offered at a floor price of Rs 382 per share, which is significantly lower than LIC’s previous closing price of Rs 428.50. At the full 6.5 per cent offer size, the transaction is estimated to generate proceeds of around Rs 31,000 crore to Rs 35,000 crore, depending on the final price at which shares are sold.

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Following the announcement of the stake sale, LIC shares faced selling pressure in the stock market and declined as much as 9.26 per cent on Tuesday, reaching their lowest level in nearly four months. Investors reacted to the possibility of increased supply of shares in the market, though analysts noted that higher public ownership could improve liquidity and expand the company’s investor base over the long term.

The OFS marks the first government divestment in LIC since its initial public offering in May 2022. During the IPO, the Centre sold a 3.5 per cent stake in the insurer and raised around Rs 21,000 crore. The listing was part of the government’s broader disinvestment strategy aimed at unlocking value from public sector assets.

The LIC stake sale is also expected to support the government’s wider asset monetisation and disinvestment plans for the financial year 2026-27, which have a target of raising Rs 80,000 crore. The transaction could provide additional resources to the exchequer while helping LIC move closer to regulatory public shareholding norms and strengthening participation from retail and institutional investors.

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