The long-awaited offer for sale (OFS) in Life Insurance Corporation (LIC) has finally opened, with the government launching a stake sale of up to 6.5% in the country's largest insurer.

The government on Tuesday announced that it will sell up to a 6.5% stake in LIC at a floor price of ₹382 per share through a two-day OFS. The issue opens for non-retail investors on Tuesday (August 4), while retail investors can bid on Wednesday (August 5).

Shares of the company tumbled as much as 8.86% to ₹390.50 apiece on the NSE in the early trade following the OFS launch.

If the issue is fully subscribed, the sale of over 82.22 crore shares, representing a 6.5% stake, is expected to fetch around ₹31,000 crore for the government's disinvestment kitty.

"Offer for Sale in LIC opens tomorrow for non-retail investors. Retail investors can bid on Wednesday. The Government offers to disinvest 2.5% of equity, with an additional 4% as a green shoe option. The floor price has been fixed at ₹382 per share. This will help achieve MPS milestones ahead of schedule," the Department of Investment and Public Asset Management (DIPAM) Secretary said in a post on X.

Key details

The floor price is at a 10% discount over Monday's closing price of LIC shares of ₹424.35 on the BSE. On the NSE, the stock settled at ₹428.50.

The stake sale will help LIC meet the minimum public shareholding requirement mandated by the market regulator, SEBI, ahead of schedule.

SEBI had given LIC time till May 16, 2027, to achieve a minimum 10% public shareholding.

At present, the government holds a 96.5% stake in LIC.

What is floor price and issue price in OFS?

In an Offer for Sale (OFS), the floor price is the minimum price at which the promoter or the government is willing to sell its shares. Investors cannot place bids below this price.

For instance, in the LIC OFS, the government has fixed the floor price at ₹382 per share, meaning all valid bids must be at or above this level.

The issue price, also known as the discovered price, is the final price at which shares are allotted after the bidding process concludes. It is determined based on investor demand and can be equal to or higher than the floor price, but never lower.

Retail investors can also opt to bid at the cut-off price, agreeing to purchase shares at the final discovered price determined through the OFS.

Harshal Dasani, Business Head of INVAsset PMS, said that the LIC OFS is best viewed as a liquidity and market-deepening exercise rather than a change in ownership philosophy.

The government continues to retain an overwhelming majority stake while moving LIC closer to the mandated 10% minimum public shareholding requirement by May 2027.

"If the entire 6.5% stake is sold at the ₹382 floor price, the issue size would be about ₹31,400 crore, making it one of the Centre’s largest divestment exercises this fiscal. More importantly, it signals a shift towards calibrated stake dilution in large public sector companies instead of outright privatisation," the expert added.

Dasani noted that a higher public float should improve liquidity, broaden institutional ownership and strengthen price discovery, all of which are positive for the long-term quality of the market.

Key risks

The key risk is not LIC’s business, but the market’s ability to absorb such a large supply. A sizeable OFS at a meaningful discount can keep the stock range-bound in the near term until the additional supply is digested.

"Investors should also separate the transaction from LIC’s operating fundamentals. The proceeds accrue to the government and do not strengthen LIC’s balance sheet or alter its earnings trajectory. Once the technical impact of the OFS fades, the stock will again be driven by new business growth, margin trends, investment performance and embedded value growth. The response to this issue will also be closely watched, as it could influence the timing and scale of future PSU divestments," Dasani added.

LIC IPO details

In May 2022, LIC sold a 3.5% stake through an initial public offering (IPO) at a price band of ₹902-₹949 per share, raising about ₹21,000 crore.

Divestment receipts so far

So far in the current fiscal year, the government has raised ₹21,082 crore through stake sales in seven public sector undertakings (PSUs) and remittances from the Specified Undertaking of the Unit Trust of India (SUUTI).

Here are the details

Why does the government launch OFS from time to time?

An Offer for Sale (OFS) is a mechanism through which the government sells its stake in listed public sector companies to institutional and retail investors. It helps the Centre raise funds for its disinvestment programme, improve public shareholding to meet SEBI's minimum public shareholding (MPS) norms, and enhance liquidity and broader ownership in listed companies.

Shares likely to fall today

LIC shares may decline as the OFS floor price of ₹382 per share is below the prevailing market price. Stocks typically move closer to the OFS price during such stake sales, with the additional supply of shares also putting short-term pressure on the stock.

LIC Q1 FY27 earnings schedule

Life Insurance Corporation of India (LIC) on July 30 said its Board of Directors will meet on Thursday, August 6, 2026, to consider and approve the unaudited standalone and consolidated financial results for the quarter ended June 30, 2026 (Q1 FY27).

Earnings call

Following the results announcement, LIC will host an earnings call with analysts and investors at 7:00 p.m. IST on August 6 to discuss its financial performance for the June quarter.

With inputs from PTI