Generally, investors are cautious in high volatility markets and avoid making fresh investments. Hence the equity market needs to be stable, so that investors can invest in LIC IPO with confidence.
LIC IPO: The IPO of the country’s largest insurance company Life Insurance Corporation of India (LIC) can be postponed till the next financial year. Market experts say that the Russo-Ukraine war has dampened the interest of fund managers in the public issue, due to which the government may extend the timeline of this IPO to the next financial year. Let us tell you that Finance Minister Nirmala Sitharaman had indicated a few days ago that due to the rapidly changing international situation, the government may reconsider the timeline of LIC’s IPO.
The government was looking to sell 5 per cent stake in LIC IPO this month, which could fetch over Rs 60,000 crore to the exchequer. This IPO would have helped in achieving the disinvestment target of Rs 78,000 crore in the current financial year.
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What do experts say
- Arijit Malakar, Head of Retail Equity Research, Ashika Group, said, “The current geo-political tension between Russia and Ukraine is affecting the global equity market. This has also led to a fall in the Indian markets and it has seen a correction of about 11 percent from the highest level ever. Thus, the market volatility at present is not favorable for LIC IPO and the government may postpone this IPO till the next financial year.”
- He further added, “Generally, investors are cautious in high volatility markets and avoid making fresh investments. Thus, the equity market needs to be stable, so that investors can invest in LIC IPO with confidence.”
- Tanushree Banerjee, co-head of Research-Equitymaster, said the same thing. He said that the week market sentiment, especially the Ukraine-Russia war is not good for IPOs. However, the IPO is likely to be postponed. This issue is very important for the government’s disinvestment plans.
- Agarwal further said, “FPIs are anyway selling in the markets for the last few months. Whereas domestic investors have been net buyers. The government is preparing to raise around Rs 65,000 to 70,000 crore through this IPO. Considering the size, this IPO will require adequate liquidity. This means that it will need the support of foreign investors. The government is aware of this and hence the cabinet has approved 20 per cent FPI investment in LIC IPO under the automatic route,”
- Tradesmart chairman Vijay Singhania said that the war is now going on in an area where nuclear power plants are operational and any accident can pose a great danger. He further said, “For the government, a delay of a few months in the IPO at this point of time is not a big deal. Also, it is better to postpone this IPO for some time than to take a risk.”
- According to Ankit Yadav, Director, Wealth Manager (USA), Market Maestroo Pvt Ltd, most of the successful IPOs always result in a bull run in the stock market.
Russia-Ukraine War Impact: LIC IPO may be delayed, Finance Minister said, ready to reconsider timeline if needed
impact on disinvestment target
If this IPO is postponed to the next financial year, the government will miss out on the revised disinvestment target by a huge margin. In fact, the biggest part of the Modi government’s plan to sell government assets to meet its budget deficit during the financial year ending March 31, 2022, is to come from LIC’s IPO. So far this fiscal, the government has raised Rs 12,030 crore through disinvestment of CPSEs and strategic sale of Air India. The government had earlier projected to raise Rs 1.75 lakh crore from disinvestment during 2021-22.
(Input-PTI)
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