The mega initial public offering (IPO) of Life insurance Corporation (LIC) is likely to be postponed given the deteriorating geopolitical situation and the consequent choppy state of the markets. The government is re-looking the timeline to ensure the state insurer’s debut is a successful one. “We would like to conclude the process by March end but given the market conditions we could consider a fresh date,” a senior government official explained.
The government’s rethink is understandable, say market watchers, pointing out that sticking to the March-end target, amidst the prevailing subdued sentiment, could require the shares to be priced lower than the currently expected Rs 2,000-2,100. This then would not fetch the government the estimated Rs 65,000-70,000 crore for its 5% stake sale in the insurer. Only in a good market, experts say, would it be possible to attract a market capitalisation of Rs 13-14 lakh crore.
The outbreak of war between Russia and Ukraine, and subsequent imposition of sanctions on Moscow by the US have left world markets jittery. Even ahead of this the US Fed’s imminent tightening had resulted in foreign portfolio investors (FPIs) turning sellers of Indian stocks. FPIs have sold some $15 billion worth of shares in the last five months having pulled out close to $10 billion in January and February. Having hit 61,765.59 in October, the Sensex has come off to levels of 56,250.
While LIC chairman MR Kumar had said, at a press conference on February 21, that he was watching the markets and was keen to list the insurer in March, things have taken a turn for the worse since then. The red herring prospectus filed by LIC has pegged the embedded value of the state insurer at Rs 5.4 lakh crore.
A delay in the LIC issue to the next fiscal would be a blow to the government’s finances leaving it woefully short of revenues. Already, the disinvestment target for the current fiscal has been pruned to Rs 78,000 crore from the Rs 1.75 lakh crore envisaged in the Budget estimate. So far, in FY22, the proceeds from divestment have been a paltry Rs 12,424 crore.