LIC IPO: Govt may review timing of LIC IPO after Ukraine Invasion

The much-anticipated initial public offering (IPO) of state-run insurance company Life Insurance Corporation of India (LIC) may be postponed to the following fiscal year, as the government is expected to host a meeting to reassess the IPO scheduling in light of the increasing Russia-Ukraine crisis.

A meeting for a possible reassessment of LIC listing will be place “this week”, according to a government person with knowledge of the situation.

“Ideally, I’d like to go ahead with it because we’d planned it for some time based purely on Indian considerations,” Sitharaman said in an interview. “But if global considerations warrant that I need to look at it, I wouldn’t mind looking at it again,” she said.

The assessment could have an impact on the timing of India’s largest mammoth public offering, which made up the majority of the country’s $10.4 billion asset-sale programme targeted at reducing the fiscal deficit for the fiscal year ending March 31, 2022. The government had set a March deadline for the IPO, and in its IPO paperwork filed on Feb. 13, the insurance giant’s embedded value was listed at 5.4 trillion rupees ($71.7 billion).

“When a private sector promoter takes this call, he has to only explain this to the company’s board,” she said, when asked if a call about delaying the IPO could be constrained by the government’s annual disinvestment targets. “But I would have to explain it to the whole world.”

Sitharaman stated that the administration hoped to go forward with the listing as planned. She also stated that the pressure to reach revenue targets from the sale of government holdings in enterprises during the current fiscal year, which ends March 31, would not be a factor in determining the date of the LIC IPO.

Sitharaman told reporters in Mumbai on February 22 that the government was proceeding with the IPO, which has created a strong buzz in the market.  “There is a buzz in the market and there is interest for LIC IPO. We are going ahead with it,” Sitharaman had said, but also noted that “we are equally worried if the market situation is conducive”.

Furthermore, the armed war in Eastern Europe has caused market anxieties all around the world. The sanctions imposed on Russia are expected to deepen the crisis, with the commodities market being the first to suffer. Crude oil prices have surpassed $100 per barrel, and Goldman Sachs has boosted its one-month Brent prediction to $115 per barrel.

The sanctions have wreaked havoc on the Russian market. The geopolitical concerns also impacted European bourses, with the key German and French indexes falling by more than 3% in the early trading hours of this week.

If the government decides to reconsider the timing, the IPO might be postponed until the global dangers that have blown up the market have subsided. This may be excellent news for investors who were concerned about their dwindling profits as a result of unfavorable market circumstances. However, it is bad news for the government, which is working hard to complete the IPO and get closer to the budget deficit objective.