Mumbai : The government executed its Rs 31,500-crore stake sale in Life Insurance Corporation of India (LIC) with extraordinary secrecy. Only a small group within the Department of Investment and Public Asset Management (DIPAM) knew the exact launch schedule, while advisers and bankers were informed in phases after market hours. In one instance, an investment banker was summoned to DIPAM’s New Delhi office without being told the reason for the meeting.
According to Bloomberg, one adviser learnt about the launch only shortly before the stock exchanges were formally notified on Monday. The operation eventually became India’s largest secondary share sale through the stock exchange. Initially, the government offered a 2.5% stake in LIC while retaining the option to sell an additional 4% if investor demand remained strong. Following robust participation from institutional investors, the government exercised the oversubscription option, increasing the total stake sale to 6.5% and raising around Rs 31,500 crore.
One bank had reportedly offered to work without a fee during the bidding process, prompting the others to waive their charges as well. While such an arrangement may appear uncommon, large government mandates often provide investment banks with long-term strategic benefits, including stronger credentials, improved rankings in league tables and closer relationships with the government.
Instead, officials advanced the sale, believing that an element of surprise would minimise the risk of speculative trading and unnecessary pressure on the insurer’s share price. The strategy paid off. The institutional investor portion of the offer was subscribed 3.32 times, giving the government enough confidence to invoke the additional 4% oversubscription option. The retail portion closed with a subscription of 69%, while the overall offer was subscribed 1.2 times, enabling the government to sell the full 6.5% stake.
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