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NEW DELHI : The government is considering increasing the stake it plans to sell through an initial public offering of state-run Life Insurance Corp. of India (LIC) from 5%, even as the timing of the share sale is being finalized.

While the government can sell as much as 7.5% of LIC, it may decide to sell only between 5.5% and 6.5%, depending on the investor interest, an official aware of the discussions said. The official said that the government will have to file revised share sale documents if it wants to sell more than 7.5%.

“Merchant bankers have been talking to investors. A final call will be taken based on the interest shown by pension funds, sovereign funds and other investors and the anchor book prepared by the bankers," the official said, asking not to be named as talks are still going on.

Discussions on increasing the IPO size to more than 5% have begun after evaluating the situation arising from the Russia-Ukraine war and its impact on the stock markets.

Selling more shares, if there is enough investor interest, in the IPO will result in a windfall for the government. Mint had reported earlier that the government was looking at raising as much as 75,000 crore by selling a 5% stake in the country’s largest insurer.

The success of LIC’s IPO is crucial for the government to meet its asset sales goal, which has been kept at a conservative 65,000 crore for the current fiscal, lower than the revised 78,000 crore for the previous fiscal. However, the government could meet less than 17% of the revised target as the Russian invasion of Ukraine and the ensuing volatility in stock markets forced it to postpone the LIC share sale to this fiscal year.

“Volatility has reduced to some extent, and we also have the outer window of 12 May, and discussions with investors should materialize before that," the official said.

Another official said the timing of the IPO may also be pushed back further by 2-3 weeks to late April or even early May as the government expects the volatility in the stock markets to ease.

Delaying the IPO beyond 12 May will, however, mean that the government will have to include December quarter financials for LIC and refile the prospectus, which will delay the IPO by two to three months, a situation that it wants to avoid.

Queries to the finance ministry remained unanswered till press time on Tuesday.

Tuhin Kanta Pandey, the secretary for the department of investment and public asset management (Dipam), said last month at the Mint India Investment Summit 2022 that there is strong investor interest in the state-run company’s offer, but the Centre will proceed with the IPO only when it is confident of successfully listing the insurer.

Dipam has been holding roadshows with sovereign wealth funds, alternative investment funds, pension funds, mutual funds, and new investors across markets, including the US, UK, Canada, Australia and Japan, showing interest, Mint had reported earlier.

However, the exclusion of several Russian banks and entities from the Swift payments system due to sanctions has become a major concern for investors. Indian fund managers were also against the IPO being launched in March.

The IPO will be the largest in India, with millions of retail investors expected to invest, a third official said. So, if the post-listing share price faces a lot of volatility due to the geopolitical situation, it may lead to retail investors getting disappointed, the person said, adding the government would want to avoid such a situation.

On Monday, finance minister Nirmala Sitharaman praised Indian retail investors for protecting the stock markets from volatility.

Retail investors have vested their confidence in the Indian stock markets and are protecting them from the volatility that could arise from fund flows of foreign portfolio investors into and out of the country, Sitharaman said in Lok Sabha on Monday.

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