SEBI Allows LIC To Have 3 More Years To Meet The MPS Norms

The Securities and Exchange Board of India (SEBI) has extended the deadline for Life Insurance Corporation of India (LIC) to achieve a 10% public shareholding, providing the insurance giant with an additional three years. Under Rule 19(2)(b)(iv) of the Securities Contracts (Regulation) Rules, 1957, companies are mandated to have a minimum of 10% public shareholding within five years from their listing date.

Revised Timeline Set by SEBI

With the recent three-year extension granted by SEBI, LIC now has until May 16, 2027, to meet the 10% public shareholding requirement, allowing the corporation more time to comply with regulatory standards and work on the public shareholding part.

Government’s Exemption and Stakeholding

The central government had previously granted LIC a one-time exemption to achieve a 25% Minimum Public Shareholding (MPS) within ten years of its listing.  In May 2022, the government divested a 3.5 % stake in LIC through an offer for sale (OFS), generating approximately Rs 21,000 crore.  The government divested over 22.13 crore shares, equating to a 3.5%  stake in LIC, through its IPO. Presently, the government holds a substantial 96.% stake in the company. Despite being India’s largest IPO, investors from the initial batch have experienced minimal returns, as the stock is trading slightly above its issue price of Rs 949. 

Performance and Share Price

Following its listing, LIC’s shares experienced a turbulent path. Despite an initial discount of over 8%  on its issue price of Rs.949, the company’s shares witnessed a decline. However, recent market movements have seen a positive uptick. After the announcement, the LIC stock saw an increase and was trading at Rs 962.20, up by 3.3% today.

Conclusion: SEBI’s decision to grant LIC an extension reflects a reasonable approach to regulatory compliance, recognizing the challenges faced by companies in meeting stringent public shareholding requirements. As LIC makes its way through achieving these targets, its legacy as a provider of financial security to millions of Indians remains intact.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.