LIC Share Price Falls After OFS: Why Government Sold Stake at a Steep Discount of 10%

The Life Insurance Corporation of India (LIC) Offer for Sale (OFS) has concluded after receiving a strong response from investors. The Government of India also exercised the green shoe option, taking the total stake sold to more than 82 crore shares.

Following the OFS, public shareholding in LIC has increased to 10%, helping the company meet the minimum public shareholding requirement ahead of the deadline set by the Securities and Exchange Board of India (SEBI).

More than 82 crore LIC shares worth around ₹31,552 crore were allocated during the two-day OFS.

What Is LIC OFS?

An Offer for Sale, or OFS, is a mechanism through which existing shareholders of a listed company can sell their shares through the stock exchange.

In the case of LIC, the Government of India sold a portion of its existing stake. LIC itself did not issue any new shares and therefore will not receive the proceeds from the transaction. The money raised through the OFS will go to the government.

The transaction reduces the government's stake while increasing the proportion of LIC shares held by public investors. The total number of shares issued by LIC does not change through a normal OFS.

Why Did the Government Sell LIC Shares?

Before the OFS, the government held approximately 96.5% of LIC, while public shareholders held around 3.5%.

The government's stake sale was primarily aimed at helping LIC meet the minimum public shareholding requirement.

SEBI had given LIC time until May 16, 2027, to raise public shareholding to at least 10%. Following the OFS, LIC has reached the required 10% public shareholding level ahead of schedule.

The government offered 82.22 crore shares at a floor price of ₹382 per share, helping generate more than ₹31,000 crore through the disinvestment.

Why Did LIC Shares Fall After the OFS Announcement?

One of the biggest reasons behind the decline in the LIC share price was the discounted OFS floor price.

The government set the floor price at ₹382 per share, which was around 10.9% below LIC's previous closing price of ₹428.50.

This created a price gap between the stock available on the exchange and the shares available through the OFS.

When investors could potentially buy LIC shares at ₹382 through the OFS, demand for the stock at a significantly higher market price weakened. As a result, the market price came under pressure and moved closer to the OFS floor price.

Another factor was the sudden increase in the supply of LIC shares available to public investors. The government's large stake sale increased the number of shares available in the market, which can temporarily put pressure on the stock price when supply rises sharply.

LIC's Business Performance Remains Strong

Despite the short-term pressure on the LIC share price, the company's underlying business performance has shown improvement.

During FY2025-26, LIC's Value of New Business (VNB) increased by 41.6% to ₹14,179 crore.

The company's VNB margin also improved from 17.6% to 21.2%, indicating stronger profitability from new business.

LIC's profit increased by 19.3% to ₹57,419 crore during the financial year.

The improvement in profitability and new-business margins could remain important factors for investors assessing LIC's long-term performance after the OFS.

What Does the LIC OFS Mean for Investors?

The government stake sale marks a significant change in LIC's shareholding structure. With public ownership now reaching 10%, LIC has achieved the required minimum public shareholding level ahead of its SEBI deadline.

For investors, the immediate focus is likely to remain on the impact of increased share supply and the stock's ability to stabilize after the OFS.

At the same time, LIC's improving VNB, higher margins and growth in profitability could remain important long-term factors to watch.

In short, the LIC share price came under pressure primarily because the government offered a large block of shares at a significant discount to the prevailing market price. The OFS helped the government meet its disinvestment objective while taking LIC's public shareholding to 10% ahead of schedule.