Government seeks consultants for partial divestment in banks and LIC

The department of investment and public asset management (Dipam) on Monday solicited bids from merchant bankers as well as legal experts for minority stake sales made by the government for certain private sector banks (PSBs) along with financial institutions such as Life Insurance Corporation ( LIC) within the next three years.

The deadline for bidding from interested lawyers and bankers is on March 27. The advisers will be appointed for three years to help the government with the sale of minority stakes in PSBs and financial institutions.

The move will be significant as the Centre is likely to sell small parts of LIC as well as up to 5 PSBs to assist them in meeting MPS, the minimal public stake ( MPS) standards that are set by SEBI.

Empanelment's goal is to provide legal advisors and bankers in the financial sector, just like Dipam is empaneling those in the public sector centrally (CPSEs) sources have said.

On May 20, 2024, SEBI granted three years, or until June 16, 2027 to LIC to attain the minimum shareholding in the public market of 10 percent. The SEBI regulation required listed firms to hold a minimum 10 percentage public ownership within two years of their listing. The float for public shareholders in LIC is only 3.5 percent after the government took over shares in the month of May, allowing it to raise the amount of Rs 20,516 crore.

Although LIC is a large-cap business with the market size of nearly 5 lakh crores but it's not included in the benchmark indexes which include the S&P BSE Sensex or Nifty 50. Therefore, the government may start selling at least a 1.5 percent stake in LIC in order to make the stock qualified to join index funds in order to draw an investor pool that is larger over the long term.