New Delhi [India], August 4 (ANI): The government's Offer for Sale (OFS) in Life Insurance Corporation of India (LIC) received an overwhelming response from institutional investors, with the issue subscribed 3.32 times its base size, prompting the government to exercise the green shoe option, Department of Investment and Public Asset Management (DIPAM) Secretary Arunish Chawla said on Tuesday.

The government launched the OFS on Tuesday for non-retail investors, while retail investors will be able to bid on Wednesday. The government is offering a 2.5 per cent stake in LIC, with an additional 4 per cent green shoe option, taking the potential stake sale to as much as 6.5 per cent.

The floor price for the OFS has been fixed at Rs 382 per share. The strong institutional response has prompted the government to exercise the additional green shoe provision, which allows a seller to offer more shares than the base issue when demand is strong.

Chawla said the strong participation reflects robust investor confidence and the depth of India's capital markets. He also urged retail investors to participate in the offer when bidding opens for them on Wednesday.

'Offer for Sale in LIC received an overwhelming response from the institutional investors and was over-subscribed 3.32 times of its base size. This enthusiastic participation reflects robust investor confidence and the depth of India's capital markets. In view of the exceptional demand, the Government has decided to exercise the green shoe option,' Chawla said in a post on X.

An OFS allows promoters of a listed company, including the government in the case of public sector enterprises, to sell shares through the stock exchange. The mechanism enables the government to reduce its holding while providing institutional and retail investors an opportunity to participate in the stake sale.

The LIC stake sale is also aimed at helping the government meet Minimum Public Shareholding (MPS) requirements ahead of schedule. The government had earlier said the transaction would help increase public ownership in LIC and enable it to meet the prescribed public shareholding milestone.

The green shoe option provides flexibility to increase the size of the sale depending on investor demand. With institutional investors subscribing 3.32 times the base offer, the government has now decided to utilise this provision.

The OFS comes as part of the government's broader disinvestment programme and marks its first stake sale in LIC since the insurer's listing in May 2022.

LIC shares closed at Rs 391 per share on the NSE on Tuesday, down nearly 9 per cent. (ANI)