LIC Share Price Drops After Government Unveils ₹31,000 Crore OFS

LIC share price came under heavy selling pressure on August 4 after the Government of India launched an Offer for Sale (OFS) to dilute up to a 6.5% stake in the state-owned insurer. The issue, priced at a significant discount to the previous closing level, triggered a sharp decline in the stock during morning trade.

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LIC share price was trading at ₹398.50, down nearly 7% in early deals. The stock has declined around 6.5% so far in 2026, broadly in line with the weakness seen across the benchmark Nifty 50 index, which has fallen about 6% during the same period. At the prevailing market price, the insurer’s market capitalisation stood at approximately ₹5.05 lakh crore.

Government Begins Stake Sale Through OFS

The Centre on August 3 announced the OFS comprising a base issue of 2.5% of LIC’s paid-up equity share capital, with an option to sell an additional 4% under the green shoe mechanism. If the entire issue is subscribed, the government could raise nearly ₹31,000 crore through the transaction.

The floor price has been fixed at ₹382 per share, representing an 11% discount to LIC’s previous closing price. The sharp discount and the prospect of a large supply of shares weighed on LIC share price, which remained only about 4% above the OFS floor price during morning trading.

The offer opened for institutional investors on August 4, while retail investors will be able to bid on August 5. Department of Investment and Public Asset Management (DIPAM) Secretary Arunish Chawla said the sale includes a base offer of 2.5% and an additional 4% under the green shoe option.

Move Aims to Meet Public Shareholding Rules

The stake sale is part of the government’s plan to comply with the Securities and Exchange Board of India’s minimum public shareholding requirements.

The government currently owns 96.5% of LIC, leaving only 3.5% with public investors. If the full 6.5% stake is sold, the government’s holding will decline to 90%, meeting the target set by SEBI. The market regulator has granted LIC time until May 2027 to achieve this threshold. Under existing regulations, most listed companies are required to maintain a minimum public shareholding of 25%.

A larger public float could also improve trading liquidity in LIC share price over time. Higher free-float levels may strengthen the insurer’s eligibility for inclusion in additional passive investment indices during future reviews, subject to index providers’ criteria.

Second Major Stake Dilution Since Listing

LIC entered the stock market in May 2022 through India’s largest initial public offering. The current OFS marks another step in the government’s gradual reduction of its ownership in the insurer following the listing.

The result of the share sale will be keenly observed because it will ascertain how far the government has managed to reduce its stake while helping LIC conform to shareholding regulations.