The Department of Investment and Public Asset Management (DIPAM) has invited bids from merchant bankers and legal advisors to advise on the potential minority stake sales of select public sector banks (PSBs) and financial institutions, including Life Insurance Corporation (LIC), over the next three years. The last date for bidding is March 27. The move is aimed at meeting the minimum public shareholding (MPS) norms of the Securities and Exchange Board of India (SEBI) for listed companies. PSBs and LIC will need to raise fresh capital from the market to meet the 25% MPS norm, while PSU banks will be required to dilute their stake if they fail to comply.
The government is expected to sell small stakes in LIC to increase its public holding to 10%, which is currently at 3.5%, and make it eligible to be part of the index funds, attracting a larger pool of long-term investors. Similarly, PSU banks like Punjab & Sind Bank, Indian Overseas Bank, Central Bank of India, UCO Bank, and Bank of Maharashtra, which have public holding below 10%, may need to dilute their stake to meet the MPS norm. The empanelment of advisers will assist the government in these minority stake sales.
The move is significant, as it will help increase liquidity and attract more investors, ultimately increasing the valuation of these institutions. The advisers will be empanelled for a period of three years, and their responsibilities will include providing strategic and financial advice, valuations, and negotiated capital raisings, among others. The process is expected to be completed by May 2027, giving the institutions a 10-year window to meet the MPS norm.