Markets
Russia inflicts a timing dilemma on LIC IPO
Summary
The war in Ukraine, soaring energy prices and the prospect of a return to cold war-like geopolitical rivalry have scared investors, sparking a selloff across asset classes and delays in fund-raising plans globally
NEW DELHI : The finance ministry will review the timing of Life Insurance Corp. of India’s mammoth initial public offering as early as this week as geopolitical uncertainties triggered by the Russian invasion of Ukraine have soured investor sentiment worldwide, two senior officials aware of the development said.
A decision is likely by the end of the week on whether the state-run LIC’s IPO, India’s largest ever, should be launched this fiscal, one of the officials cited above said, requesting anonymity.
The war in Ukraine, soaring energy prices and the prospect of a return to cold war-like geopolitical rivalry have scared investors, sparking a selloff across asset classes and delays in fund-raising plans globally. The department of investment and public asset management (DIPAM), one of the nodal bodies involved in the IPO, has been holding roadshows with global investors for the past two weeks after the government filed draft IPO papers for the market regulator’s approval on 13 February.
The official said that the roadshows have been going well 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.
The government aims to sell 5% of its shareholding in the country’s largest insurer through an offer-for-sale (OFS) slated for March end, aiming to garner as much as ₹75,000 crore.
Last week, the Union cabinet approved foreign direct investment of up to 20% under the automatic route in LIC to facilitate foreign investment in the insurer.
The sale of LIC shares by the end of March holds the key for the government to meet its reduced disinvestment target of ₹78,000 crore for the current fiscal. The government initially budgeted ₹1.75 trillion from asset sales.
Finance minister Nirmala Sitharaman said earlier this week in an interview with The Hindu Business Line newspaper that the government may look at the timing of the initial share sale following the war between Russia and Ukraine.
“Ideally, I’d like to go ahead with it because it is something we’ve planned for some time purely based on Indian considerations. But now, if global considerations warrant that I need to look at it, I wouldn’t mind looking at it again," she said. She further said that the divestment target was not a constraining factor for the government.
Queries emailed to a finance ministry spokesperson on Wednesday remained unanswered till press time.
Mint had reported last month that the government is seeking a valuation of at least ₹15 trillion for LIC based on the ₹5.39 trillion embedded value worked out by actuarial firm Milliman Advisors. Investment bankers advising the government on the share sale have said that the money raised will depend on investor appetite.
A total of 10 investment bankers, including Goldman Sachs (India) Securities Pvt. Ltd, Citigroup Global Markets India Pvt. Ltd and Nomura Financial Advisory and Securities (India) Pvt. Ltd, have been appointed to manage the LIC share sale.
