A Life Insurance Corporation office in India. Photo: Supplied

The Indian government’s move to offload a stake in the state-owned insurer Life Insurance Corporation moved a step closer after the government decided on the price band and discounts.

The price band has been fixed at 902-949 rupees per share (US$11.76-$12.38) for the 210-billion rupee ($2.74 billion) initial share sale for the valuation of 6 trillion rupees, according to multiple media reports.

Life Insurance Corporation would offer a discount of 60 rupees for policyholders and 40 rupees for retail investors and employees.

The issue is likely to open for subscription on May 4 and may close on May 9. Anchor investors can subscribe on May 2.

The government would offload a 3.5% stake in the insurance behemoth by selling 221.3 million shares. The insurer has reserved 22.1 million shares, or 10%, of the issue size for its policyholders and 1.5 million for employees.

Of the remaining shares, 50% will be allocated to qualified institutional buyers, 35% to retail investors and 15% to non-institutional investors.

In February, the government filed a draft red herring prospectus stating it wanted to sell a 5% stake, or 316 million shares, in the insurance giant. However, last week the government decided to lower the issue size to 3.5%.

The market volatility caused by Russia’s invasion of Ukraine prompted the government to reduce the size of its initial share sale.

However, according to the norms laid down by capital market watchdog the Securities and Exchange Board of India, companies with a valuation of more than 1 trillion rupees have to sell a minimum 5% stake in the initial share sale.

However, the government has reportedly filed papers with the watchdog seeking an exemption from the 5% stake sale norm.

Life Insurance Corporation was initially slated to go public in the last financial year that ended March 31. However, it was put on hold after Russia’s Ukraine invasion and the following market uncertainty.

The 66-year-old company dominates India’s insurance sector with more than 280 million policies and had a market share of more than 64% in 2021.

The Life Insurance Corporation stake sale is expected to contribute a major chunk to the government’s budgeted disinvestment proceeds in the current fiscal year. The government has pegged disinvestment receipts at 650 billion rupees for the current financial year, up from 135.31 billion rupees raised in the last fiscal year.