Curbs on Russia may hit FII interest in LIC
Premium- Foreign investors may face hurdles in investing in insurer’s IPO
- Stocks take a beating globally as West steps up punitive measures
NEW DELHI : Sweeping sanctions against Russia and the expulsion of several Russian banks from financial messaging platform SWIFT could dampen foreign institutions’ participation in the share sale of Life Insurance Corp. of India (LIC), two government officials said.
“US investors, for instance, with investments in the Russian market are not in a position to withdraw any securities and invest them in something like an LIC; so, for global investors, it has become an issue," said one of the two officials cited above, both of whom spoke on condition of anonymity.
The government still plans to sell a 5% stake in the country’s largest insurer by March-end to raise as much as ₹75,000 crore; however, the Russian invasion of Ukraine and punitive measures against Russia have driven up oil prices and hammered stocks worldwide, putting a question mark over the timing and success of the initial public offering.
LIC is yet to decide the offer price for the IPO, which will be the largest in Indian stock market history. Top government officials are in discussions to decide on the timing of the IPO. The IPO will be crucial to meet the government’s divestment target of ₹78,000 crore for FY22. The target is unlikely to be met if the government fails to list LIC by 31 March.
“Escalating prices of crude oil which impacts inflation and volatility in the Indian markets as a fallout of the ongoing crisis are also being weighed by the government in deciding the timing," the second official said. The government does not want to delay the IPO too much as it may lose the momentum gained in talks with potential investors and bankers, the official added.
Queries emailed to the finance ministry remained unanswered.
Tuhin Kanta Pandey, secretary of the department of investment and public asset management (DIPAM), said on Friday that the government would take a call on the timing of the LIC IPO, keeping in mind the best interest of investors.
“There are certain unanticipated events that have taken over right now. We are closely watching the market and, certainly, whatever the government will do, we will do in the best interest of investors and also the IPO," Pandey had said.
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He said the government’s intent has been to list LIC by 31 March, but the war in Europe has created a dynamic situation. “We are closely watching (the situation), and since you are dealing with the market all the time, we have to be watchful and make our strategy accordingly," Pandey had said. Last week, the cabinet approved foreign direct investment of up to 20% under the automatic route in LIC to facilitate foreign investment in the insurer. Mint 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.
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