The state-owned insurer Life Insurance Corporation of India (LIC) IPOwhich was likely to hit the markets in March, is on a wait and watch mode amid high market volatility owing to geopolitical tensions, sources told Moneycontrol.com.
Yesterday, Finance Minister Nirmala Sitharaman had said that the government will go ahead with the planned initial public offer (IPO) of Life Insurance Corp of India (LIC) despite the market volatility due to geopolitical developments.
Moneycontrol.com reported that the government is keeping a close eye on global developments due to the tension between Ukraine – Russia tensions and market volatility caused as a result of the same.
Sources also said that the upcoming initial public offering (IPO) of Life Insurance Corporation will go ahead as planned, adding the government has time till March First week to take any decision on it. “Don’t see an impact on LIC IPO plan for now,” sources say.
Government sources also assert India is prepared to deal with any situation arising out of global developments, and they don’t expect the impact of the crisis to be severe on the Indian economy.
Reacting on whether the invasion of Ukraine by Russia could have repercussions and drive up uncertainty, sources tell the geopolitical tensions potentially push up interest rates and also inflation but these could still be manageable.
The government plans to sell 5 per cent of its stake in LIC for around Rs 65,000 crore in what is the largest such issue from India valuing the insurance behmoth at about Rs 13 lakh crore. LIC is likely to be listed in the local markets before the end of March 2022.
The insurance behemoth has filed a draft paper for its share sale with the market regulator. The market is expecting approval soon and public bidding will likely start by mid-March. The government, which owns the entirety of stake in the company, is keen to finish the sale by the end of this fiscal year despite unfavourable markets.
Further, foreign investors have been bearish on India for a while now. In the current calendar year, they have withdrawn about Rs 52,500 crore from equities, data available at NSDL shows.
The government is rushing to complete the IPO by the end of March to meet its 2021/22 fiscal deficit target of 6.4 per cent of gross domestic product (GDP), which is contingent on it raising around Rs 60,000 crore ($8.03 billion) from the issue.
New Delhi sharply trimmed its divestment and privatisation plans for the fiscal year that ends on March 31 to Rs 78,000 crore from Rs 1.75 lakh crore. So far it has raised just Rs 12,000 crore from diving stakes in state-run companies as it failed to privatise, including run refiner Bharat Petroleum Corp Ltd and two banks.
Investor roadshows for the offering, which at $8 billion is set to be the third largest insurance IPO globally, started earlier this week, Reuters reported.
SBI Caps, Citigroup, Nomura, JPMorgan, Goldman Sachs, along with five other domestic and international investment banks, are bookrunning lead managers for the deal.
LIC’s upcoming offering has battered shares in other listed Indian insurers as investors trim their holdings to make room for the state-owned giant, fund managers and analysts have said.
The 66-year-old company dominates India’s insurance sector with more than 280 million policies. It was the fifth biggest global insurer in terms of insurance premium collection in 2020, the latest year for which statistics are available.
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