The government’s plan to sell its stake in India’s largest life insurance company, LIC, was nothing new. However, the astonishing speed and secrecy with which the government executed this mega deal has sent shockwaves through the stock market. The details were kept completely secret until the final few hours—even several key advisors and bankers were kept in the dark. This super-fast and secretive strategy by the government resulted in it selling more than twice the initial planned amount of shares, raising $3.3 billion, or approximately Rs 31,000 crore.
The country’s largest secondary offering through a stock exchange
This entire deal has become the country’s largest secondary offering ever conducted through the history of the Indian Stock Exchange. According to sources with inside information, select officials of the government’s Disinvestment Department kept the date of this mega launch completely secret. The main purpose behind this was to prevent any traders from positioning themselves before the sale and to prevent any significant decline in the company’s share price before the government’s stock market entry. The banks advising on the deal were also carefully informed at various times. The situation was such that one of these banks learned about this major decision only shortly before sending the formal notification directly to the stock exchange on Monday.
Only the core team was aware of this secret deal
Hours before the share sale was to begin, a banker, one of the four key advisors to the deal, was summoned to the Department of Disinvestment’s office in New Delhi without any specific reason. Upon arrival, officials surprised him by announcing that the massive sale of the government’s stake in LIC would begin that evening and immediately asked him to prepare exchange filings. An insider said only a small core team was aware of the plan, with the remaining advisors only being brought into the process after market hours.
Another interesting aspect of this deal was that none of the consultants or banks involved charged any advisory fees to the government. Sources said that when the Request for Proposal (RFP) process was underway, one investment bank offered to work for free, following which the remaining four banks also took the bold decision of not charging any fees. Investment banks in India typically charge nominal fees for government deals or take such steps to maintain their credibility, league-table credit, and long-term business relationships with the government.
Very smart and clever choice of timing
The timing of this entire deal was also very strategic and carefully chosen. Major market experts and traders expected the sale of LIC shares to occur after the company announced its quarterly financial results (earnings) on Thursday. However, officials were one step ahead of this general market expectation and executed the transaction well in advance.
Government officials and financial experts believed that keeping investors and traders in a state of complete confusion would help stabilize share prices. However, no official statement has been issued by the Department of Disinvestment on this matter. Experts say that after strong advice from its bankers, the government initially decided to sell an initial 2.5% stake, while keeping open the option to increase this stake to 4% if there was strong demand from investors. This initial base portion remained small, significantly increasing the likelihood of the deal being fully subscribed and sending a very positive message to large investors.
This masterstroke trick of the government proved to be completely successful.
The government’s clever maneuver paid off. On Tuesday, institutional investors subscribed 3.32 times the initial base portion, giving the government a great opportunity to capitalize on the oversubscribed portion. According to official stock exchange data, the retail investor portion, which closed on Wednesday, also received 69 percent subscription.
Overall, the entire transaction was subscribed 1.2 times. Following the completion of this mega transaction, public shareholding in LIC will increase to 10%. With this, the minimum public shareholding requirement set by market regulator SEBI has been successfully met, well ahead of the May 2027 deadline.