Government Appoints Merchant Bankers & Legal Advisors for Minority Stake Sales in LIC and PSBs

Department of Investment and Public Asset Management (DIPAM) finalized the empanelment of merchant bankers and legal advisors for a tenure of three years, with provision for extension up to five years, to lead the government’s minority stake sales in Life Insurance Corporation (LIC), public sector banks (PSBs), and insurance companies. This strategic step is pivotal in aligning with SEBI’s public shareholding norms and accelerating the disinvestment agenda.

Background & Rationale

Why is the government taking this step?

The ministry of finance, via DIPAM, oversaw this move to ensure that state-run financial institutions meet minimum public shareholding (MPS) mandates set by Securities and Exchange Board of India (SEBI). Multiple RFPs were floated in February 2025 for the empanelment of relevant advisers

Details of the Appointment

Tenure: The merchant bankers and legal advisors are appointed for 3 years, with a conditional extension up to 5 years

Scope: These advisers will manage all financial institutions’ divestment-related transactions, enabling individual stake sale events over the duration

Alignment with SEBI Norms & Timelines

LIC: SEBI mandates a minimum 10% public shareholding within two years of listing. LIC’s current public float stands at 3.5%, following a 2022 IPO Additional stake sale is required to reach this threshold by the May 16, 2027 deadline Other PSBs & financial institutions: These are required to attain 25% public shareholding by August 1, 2026

Strategic Significance

This empanelment reflects a broader disinvestment consolidation strategy, aimed at,

Accelerating the government’s ownership reduction in LIC and PSBs. Gradually facilitating multiple Offer-for-Sale (OFS) tranches over the next three years. Enhancing liquidity, transparency, and compliance with capital market regulations. Boosting eligibility of LIC to be included in benchmark indices, thus widening investor participation