Is LIC playing life guard to govt's divestment programmes?

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26 Aug, 2025 12:21

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State-run Life Insurance Corporation has once again stepped in at the last minute to rescue the government in its divestment programme in Rashtriya Chemicals and Fertilisers (RCF) held last week.

In a disclosure to the exchanges, LIC said it bought 3.16 shares of the 6.9 crore shares that were offered by the government. Read This:  RCF OFS issue fairly valued; subscribe to issue, says Angel

This means it bought 45.86 percent of the auction shares valued at Rs 142.35 crore.

Through the auction, the government has diluted 12.5 percent stake and has raised Rs 310 crore. The government had fixed the floor price at a premium of 2.5 per cent over the then prevailing price.

This is not the first time LIC has bailed about government in its divestment programmes. Last year, it had bought 377 million shares (88 per cent) of the 427 million shares on offer during the ONGC share auction. That time, newspapers had reported quoting sources that LIC was summoned by the government to fill in the gap after poor interest from investors in the share sale.

Early this year, in the Hindustan Copper OFS (offer-on-sale), the company again had to pick up 22.5 million shares.

Why is LIC playing knight in shining armour to government's divestment programmes?

According to a Business Standard report quoting an investment banker, the share sale was not even half-covered an hour before the close of the bids, hence LIC has to put in a large ticket application.

Earlier, afterONGC and Hindustan Zinc's divestments programmes were over, marketmen had said that the government had forced LIC to participate in the stake sale auction.

However, LIC's chairman D.K Malhotra begs to differ. He told Business Standard that his company has not bailed out anyone. He took up the offer only after examining RCF issue by its own merits. Even in future, if similar issues come up, he may examine the situations and then take a call.

Meanwhile, sources say that there has been a tepid response from investors in all the three divestment programmes organised by the government. The auction process is widely seen as a speedy, innovative and flexible way for the government to sell shares and raise money but ONGC, Hindustan Copper and RCF experiences have been sad and can impact similar upcoming programmes for BHEL, NeyVeli Lignite, Hindustan Aeronautics by which the government plans to raise around Rs 40,000 crore.