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MUMBAI/DELHI : India’s markets regulator has cleared the share sale proposal of state-run Life Insurance Corp. of India, or LIC, paving the way for the government to launch India’s largest initial public offering, two people with direct knowledge of the matter said.

“On 3 March, a clarification was sought by the Securities and Exchange Board of India (Sebi) from the lead manager of LIC, and a response was received quickly. The final observation for the public issue was issued by Sebi on Tuesday evening. It will soon be disclosed formally to the public," one of the people said requesting anonymity.

The hotly-anticipated public issue will test investors’ appetite amid the volatility caused by the Russian invasion of Ukraine and soaring energy prices. Although the government has targeted to launch the IPO by the month-end, several officials have indicated that the plan may be delayed because of the current geopolitical concerns.

An email sent to Sebi did not elicit any response till press time

“The government is not certain whether to launch the IPO in March or postpone it to mid-April. Expert committee meetings are on, and a decision will be taken soon," the second person said.

The insurer received Sebi’s approval in just 22 days and just after one round of clarification from bankers, despite the voluminous 650-page prospectus given for the regulator’s scrutiny. The government plans to mop up about 75,000 crore by selling a 5% stake in the country’s largest insurer.

The success of LIC’s IPO is critical for the government to meet its asset sales goal, which has been slashed by more than half to 78,000 crore for the current fiscal. The sale of LIC’s shares by March-end will also determine whether the government can meet its fiscal deficit target.

Efforts to ensure the success of the mammoth IPO are in full swing, with even the regulator nudging investment bankers not to crowd the market over the next few weeks, bankers said. But chances of other IPOs during this period appear slim as most companies have mothballed their IPO plans because of market volatility.

In addition, few companies would want to go head to head with an 800-pound gorilla, investment bankers said, referring to the staggering scale of the insurance behemoth’s public offering.

However, Indian fund managers said the IPO should ideally be launched after the war in Ukraine stops because the conflict has made a significant impact on oil, currency and the Indian economy.

“Price discovery is always tricky during such global events. It’s better to wait for a little and let the geopolitical tensions ease both for bankers and the prospective investors," said a fund manager, whose company manages assets worth more than 2 trillion.

All six fund managers Mint spoke to are keen to invest in the LIC IPO if the valuation is fair.

Fund managers have turned cautious since stock prices of several companies that went public in the past year have tumbled after listing, some currently trading even below the issue price.

About a week ago, Sebi raised serious concerns about the pricing of IPOs of startups.

“We will invest only if the pricing is fair, considering that the current conditions may result in a major market correction," said one of the fund managers.

“After the Sebi approval, Dipam, financial ministry (officials) and LIC officials would have a crucial meeting this week and, may be, this weekend too, with an aim to decide the future course of action on IPO (either March or April). Also, a decision would be taken on the filing of red herring prospectus in the meeting," said the first person.

“LIC’s financials for the September-December quarter of FY22 have been audited and this would be inserted in the RHP as additions. Following this, the RHP will be filed with Sebi," said the first person.

LIC has a gigantic base of 280 million policyholders and the insurer has been on the job to convert these policyholders into PAN holders and link their PAN with fresh or existing demat accounts so that they are able to invest in LIC IPO.

“So far, at least 70 million policyholders’ PANs have been matched with their LIC policies and linked with their demat accounts. Of this, at least 45 million policyholders have got fresh PAN numbers to be able to invest in the LIC IPO,"said the first person.

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