By Ruchit Purohit & Malini Bhupta
The Life Insurance Corporation’s public offer could not have come at a worse time. Given the sharp volatility in markets across the world, with foreign portfolio investors heavily selling stocks since October, market experts believe that the government needs to either cut the size of the issue or price it more attractively to draw in more investors.
Raamdeo Agrawal, chairman & co-founder, Motilal Oswal Financial Services, said: “Already the LIC stock is trading at a discount. The bankers should price the issue in a manner that the retail can lap it up. The market’s conditions have changed. A national asset is being primarily sold to citizens and, hence, the issue needs to be pushed in the right way, and, in a sense, that’s what market would like to pay. The post listing experience should be good.”
LIC’s IPO is almost 50% of equity capital raised through initial public offerings last year. This would require substantial liquidity in the market for it to sail through successfully and as a result the market believes that it needs to be “priced smartly”.
Nearly 1 crore policyholders have opened demat accounts in the last couple of months to subscribe to the public offer. The government is keen to conclude this offer in the current fiscal year to meet the divestment target. However, given the current market conditions, experts believe that the government may have to make the offer sweeter for both institutional and retail investors. According to sources, the government and bankers are expecting to raise between Rs 65,000 and Rs 75,000 crore at a price band of Rs 2000-2100.
Currently, there are more headwinds to the IPO than tailwinds, and pricing it more attractively would help it sail through, and liquidity and retail participation will also not be a concern. Gopal Agrawal, MD & head, investment banking at Edelweiss Financial Services, told FE: “The only thing that the government can do in the current environment is to price the IPO attractively and then the government will be able to sail it successfully. In my view, if the pricing is right and comfortable, liquidity will not be a concern and even retail confidence will be strong.”
The market sentiment continues to remain negative amid the geopolitcal crisis and ahead of the rising of interest rates in March. Sustained selling from FPIs will continue to weigh on investor sentiment. So far since October 2021, FPIs have sold shares worth $13.5 billion in the Indian equity markets and $4.7 billion in February itself.