LIC IPO Delayed to FY23? Govt Likely to Reassess India's Mega IPO's March Listing

The government may postpone Life Insurance Corporation’s mega initial public offering (IPO) to the next financial year, as the government is likely to hold a meeting to reassess the IPO timing in view of the escalating Russia-Ukraine war, sources told CNBC TV18.

The government is continuing with its roadshows for the public offering, informed a government official. The IPO of LIC is considered to be the largest public offering by any Indian company, and is touted to be a globally eyed public listing.

A government official in knowledge of the developement has said that the review meeting of LIC listing will be held “this week.” Finance Minister Nirmala Sitharaman has “stated the government position” on the matter, the official said, referring to her remarks during a recent interview with Hindu Business Line, where she suggested that the emerging global situation may warrant a relook at the IPO timing.

“Ideally, I’d like to go ahead with it because we had planned it for some time based purely on Indian considerations,” Sitharaman told the newspaper, adding that “if global considerations warrant that I need to look at it, I wouldn’t mind looking at it again”.

LIC IPO: Impact of the Delay

The conflict in eastern Europe has impacted global stock markets, including the BSE Sensex and NSE Nifty, and international oil prices. Several experts have cautioned that global inflation level may go up due to Russia’s invasion of Ukraine.

The review could impact the timing of the mega public offering, India’s largest, which made up the biggest portion of the country’s asset-sale program aimed at stanching the budget deficit for the year through March 31, 2022.

Further, the postponement of the LIC IPO could affect bond prices and would also have a negative impact on the rupee, which is reeling under pressure due to Russia’s invasion of Ukraine.

LIC IPO: What do Analysts Say?

Commenting on a likely delay in India’s mega IPO, Dr. V K Vijayakumar, chief investment strategist at Geojit Financial Services, told News18.com : “the present weak global market environment is not the ideal setting for a mega IPO of LIC’s size. The government is likely to postpone it to FY23. Delay is better than an IPO that flops.”

LIC IPO: Stage set for Market Debut

Last week, the Union Cabinet chaired by Prime Minister Narendra Modi permitted up to 20 per cent foreign direct investment (FDI) under automatic route in IPO-bound LIC with the aim of facilitating disinvestment of the country’s largest insurer.

Setting the stage for the country’s biggest-ever public offering, Life Insurance Corporation on February 13 filed draft papers with capital market regulator Sebi for the sale of 5 per cent stake by the government for an estimated Rs 63,000 crore.

According to the draft red herring prospectus (DRHP), LIC’s embedded value, which is a measure of the consolidated shareholders value in an insurance company, has been pegged at about Rs 5.4 lakh crore as of September 30, 2021, by international actuarial firm Milliman Advisors.

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 the 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.

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