LIC Shares Drop 3 Percent Amid Speculation of Government Stake Sale

Government Plans to Sell Stake in Life Insurance Corporation of India

Shares of the Life Insurance Corporation of India (LIC) were trading 3% lower on May 27, following a report that the government plans to sell a stake of about 2% in the state-run insurer in late June or early July to institutional investors.

The Department of Investment and Public Asset Management is working with several investment banks, including Goldman Sachs Group Inc., Motilal Oswal Investment Advisors Ltd., BNP Paribas SA, and IIFL Capital Services Ltd., to manage the transaction. According to sources, deliberations are ongoing and details of the deal, including the timing and size, could still change.

The government's stake in LIC has been steadily decreasing since its initial public offering (IPO) in May 2022. At the time, the government sold a 3.5% stake in the company, raising approximately Rs 21,000 crore. The shares were priced at Rs 949 apiece. As of March 31, the government owned 96.5% of LIC.

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LIC has been granted 10 years from its 2022 listing to meet the Securities and Exchange Board of India's (SEBI) minimum 25% public shareholding requirement, giving it until May 2032 to comply. The company has been making progress in this regard, with net profit rising to Rs 23,420 crore for the three months ended March 31, up from Rs 19,013 crore a year earlier.

Last week, LIC reported a 23% rise in quarterly profit, helped by strong group business growth and continued momentum from last year's tax cuts. Net premium income grew 11.5% to Rs 1.65 lakh crore. One-time premiums rose 21.5%, while first year premiums from new policies rose around 17%. Annualised premium equivalent sales, a key measure of new business, rose nearly 22% to Rs 22,954 crore for the quarter.

LIC's group business annualised premium equivalent sales rose 37%. The value of new business, which reflects expected profit from new policies, rose 67% to Rs 58.91 billion rupees. Margins on new business stood at 21.2% as of March-end, compared with 17.6% a year earlier. The firm's solvency ratio, which measures an insurer's ability to meet its long-term financial obligations, rose to 2.35 during the quarter from 2.11 a year earlier. A higher number indicates a larger financial buffer.

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