INSUBCONTINENT EXCLUSIVE:
Government may defer LIC's IPO to next fiscal amid Russia's invasion of Ukraine, experts sayNew Delhi: Government is expected to defer the
mega initial public offering (IPO) of Life Insurance Corporation(LIC) to the next financial year as the ongoing Russia-Ukraine war has
dampened fund managers' interest in the public issue, market experts have opined.The government was looking to sell 5 per cent stake in
LIC this month, which could have fetched over Rs 60,000 crore to the exchequer.The IPO would have helped meet the curtailed disinvestment
target of Rs 78,000 crore this fiscal."The current geopolitical issue between Russia and Ukraine makes the global equity markets jittery
Indian markets also reacted negatively to this development and corrected nearly 11 per cent from its all time high. Thus, the current
market volatility is not conducive for the LIC IPO and the government is most likely to defer the issue to next fiscal year," Arijit
Malakar, head of retail equity research, Ashika Group, said.Generally, in a highly volatile market, investors tend to play safe and refrain
from making fresh investments
Thus, the equity market needs to be stable, so that investors can get the confidence to make the investment in the LIC IPO.Echoing a similar
sentiment, Tanushree Banerjee co-head of research-Equitymaster, said the weak market sentiments, especially in the wake of the
Ukraine-Russia war, have been a dampener for the IPO
While there is a possibility of the public offer getting postponed, the issue remains critical to the government's disinvestment
plans.Atanuu Agarrwal, co-founder, Upside AI, said in macro uncertainty, there is always a flight to safety to the dollar, away from riskier
assets like emerging market equities
This means liquidity drying up in the domestic markets."FPIs have anyway been net sellers in emerging markets for the past few months
While domestic investors have been net buyers and have staved off a market crash, given the size of the IPO of USD 9-10 billion, it will
need sufficient liquidity to be absorbed
This means it will need FPI support - government is cognizant of this and hence cabinet approved 20 per cent FPI investment in the LIC IPO
under the automatic route," Mr Agarrwal said.The public offer is purely an offer-for-sale (OFS) by the government of India and there is no
fresh issue of shares by LIC
The government holds 100 per cent stake, or over 632.49 crore shares, in LIC
The face value of shares is Rs 10 apiece.The LIC public issue would be the biggest IPO in the history of the Indian stock market
Once listed, LIC's market valuation would be comparable to top companies like RIL and TCS.So far, the amount mobilised from IPO of Paytm in
2021, was the largest ever at Rs 18,300 crore, followed by Coal India (2010) at nearly Rs 15,500 crore and Reliance Power (2008) at Rs
11,700 crore.Vijay Singhania, Chairman, TradeSmart said the war is now going on in a region where nuclear power plants are operational and
any mishap will be disastrous for mankind."For the government, a few months' delays would not matter much given the times we are living in
Yes, the budget numbers will go haywire, especially for FY22, but the divestment credit can be taken in the new fiscal
Further, risking an issue that can bomb in the market is worse than delaying an issue," he added.According to Ankit Yadav, wealth manager
(USA), director of market, Maestroo Private Limited, majority of successful IPOs always come in bull run in the stock market."Last few weeks
the market corrected heavily, so this may not be the right time to push the LIC IPO due to volatility
So, policy makers may defer this for now and bring it on next fiscal year," Mr Yadav said.Furthermore, IPOs generally come in low rates
So, now central banks of developed nations have already started hiking rates
So there is very little room to adjust the LIC IPO in the coming time."I think due to possibilities of hiking rates from developed nations,
LIC IPO may come by the end of April, just as soon as the Ukraine crisis eases," he added.Finance minister Nirmala Sitharaman too had
indicated a review of the IPO in view of the evolving geopolitical situation.If the initial share-sale is deferred to the next fiscal, the
government would miss the revised disinvestment target by a huge margin
So far, the government has raised Rs 12,030 crore through CPSE disinvestment and Air India's strategic sale this fiscal.The government had
earlier aimed at garnering Rs 1.75 lakh crore from disinvestment during 2021-22.
