LIC IPO: The impact of the Russia-Ukraine war can have a strong impact on the state-owned company LIC’s plan to bring a mega IPO. Market experts said that due to the current situation, the interest of fund managers in this public issue has reduced, so the government may postpone its mega IPO to the next financial year.
The government was considering selling 5 per cent stake in Life Insurance Corporation this month, which could fetch Rs 60,000 crore to the exchequer. This IPO will help in achieving the disinvestment target of Rs 78,000 crore for the current financial year.
Equity markets remain under pressure
Arijit Malakar, Head of Retail Equity Research, Ashika Group said, “Global equity markets are under pressure amid ongoing geopolitical issues due to the ongoing conflict between Russia and Ukraine. Indian markets have also reacted negatively to this and have broken nearly 11 per cent from their all-time highs.
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He said, “Therefore, the current market volatility is not conducive for LIC’s IPO and the government may postpone the issue to the next financial year.”
IPO likely to be postponed
Equitymaster’s Co-Head (Research) Tanushree Banerjee said that the weakness in market sentiment especially due to Ukraine-Russia war is disappointing for LIC IPO. In such a situation, there is a possibility of postponement of this IPO. However, this issue is crucial for the government’s disinvestment plan.
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Liquidity is decreasing in the domestic market
Atanu Agarwal, Co-Founder, Upside AI, said that emerging markets always see selloffs in the face of widespread uncertainty. This means that the liquidity in the domestic markets is decreasing.
Atanu Agarwal said, “FPIs have been net sellers in emerging markets for the past few months. Even though domestic investors continue to be net buyers and replenish the cash in the market, given the size of the $9-10 IPO, it will need adequate liquidity. This means that it will need FPI support. The government is aware of this and hence the cabinet has approved 20 per cent FPI investment in LIC IPO under the automatic route.
Postponement of IPO is not a big deal
LIC’s IPO is purely an offer for sale (OFS) brought by the government and no new issue will be issued by LIC. The government holds 100% stake in LIC or 632.49 crore shares. The offering value of the shares is Rs 10.
TradeSmart Chairman Vijay Singhania said that in view of the current situation, it is not a big deal for the government to postpone the IPO for a few months, although it will spoil the budget figures for the financial year 2021-22.
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