New Delhi | February 3, 2026
The Government of India is considering a gradual reduction of its stake in the Life Insurance Corporation of India (LIC) through a follow-on public offering (FPO), nearly four years after the country’s largest-ever IPO.
Currently, the government holds a 96.5% stake in Life Insurance Corporation of India (LIC). In May 2022, it sold 3.5% equity in the insurer via an initial public offering at a price band of ₹902–₹949 per share, raising around ₹21,000 crore.
Government Signals Gradual Divestment Strategy
Financial Services Secretary M. Nagaraju said the government intends to proceed cautiously with any further public offerings of LIC.
“The public offering of LIC will have to be brought gradually. We have asked DIPAM to examine the possibilities of reducing the government’s stake in the insurer,” Nagaraju said.
Officials indicated that any future stake sale would likely be executed through an FPO over multiple phases, keeping market conditions and investor sentiment in mind.
LIC remains a key pillar of India’s insurance sector and financial system, and policymakers have consistently emphasized the need for a calibrated approach to disinvestment.
PFC–REC Merger Proposal Under Consideration
In a separate but significant development, the government is also evaluating a potential merger between state-owned power sector lenders Power Finance Corporation (PFC) and its subsidiary REC.
The merger proposal has been included in the Union Budget, though officials clarified that a final decision will be taken at the highest level of government.
PFC acquired a majority stake in REC in March 2019 for approximately ₹14,500 crore, making REC its subsidiary. A merger could create a larger, more efficient power-sector financing institution, potentially improving capital allocation and operational synergies.
Focus on Strategic Consolidation and Disinvestment
Together, the LIC stake sale plan and the PFC–REC merger proposal signal the government’s broader strategy of strategic disinvestment and consolidation within public sector enterprises, aimed at improving efficiency while unlocking long-term value.
Market participants are expected to closely watch further announcements related to LIC’s FPO timeline and the outcome of deliberations on the proposed merger.
