The Indian government is contemplating a significant move in its divestment strategy, with plans to sell a stake worth $1-1.5 billion in the Life Insurance Corporation (LIC) of India by the end of the year. This decision comes as part of the government's efforts to increase LIC's public float to 10%, as mandated by the Securities and Exchange Board of India (SEBI).

Current Shareholding and Future Plans

The government currently holds a 96.5% stake in LIC, following the sale of a 3.5% stake through an Initial Public Offering (IPO) in May 2022. That IPO raised ₹20,557 crore. To comply with SEBI's minimum public float threshold, the government needs to divest an additional 6.5% stake by May 16, 2027.

Stake Sale Strategy

The proposed stake sale is expected to be conducted in multiple tranches to minimize the impact on LIC's stock price. The Department of Investment and Public Asset Management is currently finalizing the timeline and quantum for the next stake sale. They are considering two potential methods:

1. Qualified Institutional Placement (QIP)
2. Offer for Sale (OFS)

The choice between these methods will depend on investor demand.

LIC's Stock Performance and Market Value

LIC's stock has been facing challenges in the market:

The stock has been trading below its IPO price since July 3, 2023.

Regulatory Compliance Timeline

LIC has been granted extensions to meet regulatory requirements:

• May 2024: Three-year extension to comply with the 10% public float requirement
• May 2032: Deadline to meet the 25% public shareholding requirement

Recent Policy Changes Affecting the Insurance Sector

A recent overhaul in the Goods and Services Tax (GST) structure has brought significant changes to the insurance sector:

• The 18% levy on individual health and life insurance premiums has been abolished
• Insurers can no longer claim input tax credits on related operational expenses

This change is expected to have implications for insurance companies' operational costs and potentially their pricing strategies.

As the government moves forward with its plans for LIC, investors and market watchers will be keenly observing the impact on both the company's stock performance and the broader insurance sector in India.

Life Insurance Corporation of India (LIC), the country's largest insurer, has strongly denied claims made in a recent Washington Post report regarding its investments in Adani Group. The report suggested that LIC's investments were influenced by government instructions, a claim that the insurer has categorically rejected.

LIC's Response to Allegations

LIC issued a statement addressing the following key points:

1. Document Authenticity: The insurer stated that the documents referenced in the Washington Post report were neither issued by nor received by LIC.

2. Government Influence: LIC firmly denied receiving any instructions from the government regarding investments in Adani entities.

3. Independent Operations: The company emphasized its independent functioning, stating that investment decisions are made based on professional judgment and transparent governance.

Investment Process and Growth

LIC provided insights into its investment process and portfolio growth:

• Decision Making: Investments are made according to board-approved policies after detailed due diligence.
• Portfolio Growth: The value of LIC's investments in India's top 500 companies has seen significant growth since 2014.

• Asset Management: LIC currently manages over ₹41 lakh crore in assets.
• Diversification: The insurer's investments span 351 publicly listed stocks.

LIC's Stand on Government Involvement

LIC clarified that the Department of Financial Services plays no role in its investment decisions, reinforcing the insurer's autonomy in financial matters.

Conclusion

LIC has described the Washington Post report as an attempt to malign India's financial institutions through unverified claims. The insurer's strong rebuttal and detailed explanation of its investment processes aim to reassure stakeholders of its professional and independent operations in the face of these allegations.