LIC IPO may be Postponed Due to Russia-Ukraine Crisis

The government may postpone Life Insurance Corporation‘s massive initial public offering (IPO) until the next fiscal year, as the administration is expected to convene a meeting to reconsider the scheduling of the IPO in light of the intensifying Russia-Ukraine conflict.

According to sources, the government is continuing its roadshows for the public offering. LIC’s initial public offering (IPO) is the biggest by any Indian corporation and is expected to be an internationally watched public listing.

As per insiders, the LIC listing review conference would be taking place “this week.” According to the source, Finance Minister Nirmala Sitharaman has “expressed the government stance” on the topic, alluding to her comments in a recent interview with a newspaper, in which she noted that the evolving global environment may require a rethinking of the IPO timeline.

“Ideally, I’d prefer to go forward with it since we’d been planning it for a long time based only on Indian factors,” Sitharaman told the newspaper, adding that “if global circumstances justified it, I wouldn’t mind looking at it again.”

Effects of the Delay

Eastern Europe’s turmoil has had an influence on global financial markets, including the BSE Sensex and NSE Nifty, as well as worldwide oil prices. Several analysts have warned that owing to Russia’s invasion of Ukraine, worldwide inflation may rise.

The assessment might have an influence on the timing of India’s largest public offering, which made up the majority of the country’s asset-sale programme targeted at reducing the budget deficit for the fiscal year ending March 31, 2022. Furthermore, the delay of the LIC IPO might have an influence on bond prices as well as the rupee, which is under pressure as a result of Russia’s invasion of Ukraine.

The military conflict in eastern Europe, in particular, has sparked market concerns throughout the world. The sanctions imposed on Russia are likely to worsen the situation, with the commodities market bearing the brunt of the impact. Crude oil prices have breached $100, and Goldman Sachs has raised its one-month Brent forecast to $115.

The Russian economy has been devastated by sanctions. European bourses were also affected by geopolitical fears, with the important German and French indices falling over 3% in early trading hours this week.

What do the experts have to say?

“The current sluggish global market climate is not the optimum backdrop for a massive IPO of LIC’s scale,” analysts said in response to a possible delay in India’s mammoth IPO. It’s probable that the administration will push it back until FY23. Delay is preferable to a failed IPO.”

The stage was prepared for the market debut

Last week, the Union Cabinet, led by the Prime Minister, approved up to 20% FDI in LIC’s IPO-bound IPO through the automatic route, with the goal of expediting the country’s biggest insurer’s disinvestment. The government’s sale of a 5% stake in Life Insurance Corporation for an estimated Rs 63,000 crore was approved by SEBI on February 13, opening the way for the country’s largest-ever public offering.

The LIC public offering will be the largest in Indian stock market history. When LIC gets listed, its market value will be equivalent to that of leading firms such as RIL and TCS. The sum raised by Paytm‘s IPO in 2021 was the greatest ever, at Rs 18,300 crore, followed by Coal India (2010), which raised roughly Rs 15,500 crore, and Reliance Power (2008), which raised Rs 11,700 crore.

Disclaimer: This blog is exclusively for educational purposes and does not provide any advice/tips on investment or recommend buying and selling any stock.