New Delhi: The market experts have stated that the government is expected to differ the mega Initial Public Offering of LIC to the next financial year as the Russia Ukraine war has dampened the fund manager’s interest in the public issue.
The Government was wanting to sell Life Insurance Corporation’s five percent stake this month, which could be fetching over Rs 60,000 crore to the exchequer.
IPO would have helped to meet the curtailed disinvestment target of Rs 78,000 crore this fiscal.
The geopolitical issue between the Russia and Ukraine, is a big reason to worry about the global equity markets. To this development , Indian markets have negatively reacted, and corrected nearly 11 per cent from its all time high.
“Thus, the current market volatility is not conducive for the LIC IPO and the government is most likely to defer the issue to next fiscal year,” Arijit Malakar, Head of Retail Equity Research, Ashika Group, said.
Similar opinion has been expressed by the Tanushree Banerjee Co-Head of Research-Equitymaster. She said, “The weak market sentiments, especially in the wake of the Ukraine-Russia war, have been a dampener for the IPO. While there is a possibility of the IPO getting postponed, the issue remains critical to the government’s disinvestment plans.”
There is always a flight to safety to the dollar, says Atanuu Agarrwal, co-founder, Upside AI. She said, “In macro uncertainty, there is always a flight to safety to the dollar, away from riskier assets like emerging market equities. This means liquidity drying up in the domestic markets.”
“FPIs have anyway been net sellers in emerging markets for the past few months. While domestic investors have been net buyers and have staved off a market crash, given the size of the IPO of USD 9-10 billion, it will need sufficient liquidity to be absorbed. This means it will need FPI support – government is cognizant of this and hence cabinet approved 20 per cent FPI investment in the LIC IPO under the automatic route,” Agarrwal said.
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