LIC Share Price: The central government is going to take a big decision regarding LIC, the stock recorded a decline.

News Topical, Digital Desk : The government is considering selling 1-2% of its stake in Life Insurance Corporation of India (LIC) through an offer-for-sale (OFS) in the fourth quarter of the current financial year (FY26).

According to government sources, the company's large market cap and investors' weak risk appetite are key reasons for this proposal. A senior government official told Moneycontrol that selling a large stake in LIC is difficult in current market conditions.

Initially, discussions had suggested that the government could sell a 2.5-3% stake through an OFS, but sources suggest that this could be reduced to 1-2% given weak investor interest and current market conditions. A source said, "A 1-2% LIC OFS is possible and could fetch the government approximately ₹13,000-₹14,000 crore. Currently, there is no market capacity to sell a 3% stake, which would be valued at approximately ₹24,000 crore." The official added that the government will make a final decision after monitoring global fluctuations, domestic flows, and institutional buying capacity. He added, "We are preparing for Q4, but the final timing will depend on market conditions." First Stake Sale After LIC IPO If this OFS occurs, it will be the first time the government has sold a stake in LIC since the historic IPO in 2022. The government currently holds 96.5%. SEBI regulations require a 25% public shareholding in listed companies. However, LIC has been granted a special exemption to achieve its target of 10% public shareholding by May 16, 2027. This is part of a long-term one-time exemption that requires LIC to achieve 25% public shareholding by 2032. Retail Investor Sentiment and the Timing of the OFS: Retail investors sold over ₹25,300 crore worth of equities in October–November 2025. Higher volatility, profit-booking, and a shift toward safer investment instruments have weakened retail sentiment. Meanwhile, domestic institutional investors and mutual funds have continued to buy. This sharp shift in retail flows has prompted the government to exercise caution in the timing of LIC's OFS. Sources believe that selling stake in smaller tranches will reduce the pressure of excess supply in the market and also help meet disinvestment targets. The official said, "Retail sentiment is currently weak, so a smaller OFS is safer and more practical in the current environment." According to sources, a smaller OFS could receive strong demand from domestic institutional investors, given LIC's large weighting in benchmark indices and the company's strong earnings profile. However, global uncertainty and crude oil prices may increase foreign investor caution. With a market cap of approximately ₹6 lakh crore, LIC is one of the largest PSU stocks. Any stake sale could impact market liquidity, index weighting, and short-term share prices. Given the government's majority stake, periodic stake sales increase free float and encourage long-term institutional participation. 

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