India’s government executed its largest secondary share sale, raising $3.3 billion by concealing the deal’s size and timing until the final hours.
The state divestment department increased its initial plan for Life Insurance Corp. of India, selling a 6.5% stake instead of the originally planned 2.5%. The decision surprised traders and bankers, with some advisers learning of the launch only hours before it began.
Secrecy kept the stock price stable
Officials withheld the launch date to stop traders from shorting the stock before the sale, according to sources familiar with the process. One of the four investment banks advising the deal was called to the divestment department’s New Delhi office on Monday afternoon without explanation. There, the team was informed the sale would start that evening and was asked to prepare the exchange filing.
The remaining advisers were brought in after market hours. The core team had limited information sharing to those directly involved. A representative for the divestment department did not respond to requests for comment.
The approach succeeded. LIC’s stock price held steady during the sale, avoiding the volatility common in large block trades. Most market participants had expected the offering to wait until after the insurer’s quarterly earnings report, due Thursday. By acting early, the government reduced speculation and secured demand.
Banks worked for free to secure future deals
The four investment banks involved did not charge advisory fees for the transaction. During the request-for-proposal process, one bank agreed to work without payment, and the others followed, the sources said. In India, banks often accept minimal or no fees on government-linked deals in exchange for prestige and the potential for future business.
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The government structured the sale with an initial 2.5% stake, with an option to increase it by another 4% if demand was strong. The smaller base portion improved the chances of full subscription, a key signal for institutional investors. The strategy worked—on Tuesday, the base portion was subscribed 3.32 times by institutional investors, leading the government to exercise the oversubscription option.
Retail investors subscribed to 69% of their portion, which closed Wednesday. The entire deal was subscribed 1.2 times, according to stock exchange data. The transaction increased LIC’s public shareholding to 10%, meeting the market regulator’s requirement nearly three years ahead of the May 2027 deadline.
Last-minute maneuvers are common in government divestments, but the scale and speed of this sale were unusual. Past stake sales in state-owned companies have often been announced well in advance, giving traders time to react. The LIC deal’s secrecy allowed the government to control the outcome and prevent the price erosion that has affected other large offerings.
The sale’s success highlights the broader effort to reduce the government’s stake in state-run enterprises. With India’s fiscal deficit under pressure, such deals will likely become more frequent. The government may also explore new methods to maximize returns.
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