LIC shares zoom 7% as OFS overhang eases after Finance Ministry exemption

LIC shares on Friday rallied 7.2% to hit a fresh 52-week high of Rs 820 on BSE after the Finance Ministry granted an extension to the PSU insurer for complying with 25% minimum public shareholding (MPS) norms till 2032.

Sebi rules mandate all listed companies to maintain 25% public float but newly-listed companies are granted a three-year window to fulfil the requirement. In the case of companies with a post-issue market capitalization of more than Rs 1 lakh crore, the timeline to meet the 25% MPS rule is five years.

“Pursuant to Regulation 30 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, this is to inform you that the Department of Economic Affairs, Ministry of Finance vide Office Memorandum dated December 20, 2023, has decided in the public interest, to grant one-time exemption to Life Insurance Corporation of India to achieve 25% Minimum Public Shareholding (MPS) within 10 years from the date of listing i.e., till May 2032 under Rule 19A (6) of the Securities Contract (Regulations) Rules (SCRR) 1957,” LIC said in a regulatory filing last night.

However, the exemption doesn’t necessarily mean that the government will not offload more shares through the offer for sale (OFS) route but the exemption comes as a relief for investors.

In May 2022, the government had sold 3.5% stake in LIC IPO which was an entirely (offer for sale) worth around Rs 21,000 crore. It remains India’s largest IPO till date.

LIC IPO investors are still sitting at a loss as the stock is trading 13.6% below its issue price of Rs 949.

However, in the last few weeks, the stock has seen fresh buying interest. In the last month alone, LIC is up 25%.The latest round of buying the heavyweight counter comes after brokerages upgraded the counter with buy calls. A part of the investor optimism is also being attributed to the launch of the new Jeevan Ustav scheme, which is a life insurance plan launched with lifetime guaranteed returns.

Last month, Geojit had raised its price target on LIC to Rs 823, based on 0.65x FY25E embedded value (EV) per share.

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