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DELHI/BENGALURU : Life Insurance Corp. (LIC) of India will go public in April instead of March as decided earlier, three officials aware of the change in plans said, as the ongoing market turbulence makes the government wary of rushing India’s largest initial public offering.
The Centre is watching market volatility closely, and investor interest will be the key deciding factor for the timing of the IPO, the officials said on condition of anonymity.
The government aims to sell 5% of its shareholding in the insurer through an offer for sale (OFS) to raise as much as ₹75,000 crore.
“We will try to do the LIC IPO some time next month, maybe at the end of April. We don’t want to delay it much further. We have a window till 12 May," one of the three officials cited above said, adding the government expects the market sentiments weakened by geopolitical tensions to improve in April. “There could be some improvement in sentiment as the peak war may get settled," he said.
The second official said volatility had reduced in the past week relative to last month when global indices saw a sharp decline affecting the Indian market as well; however, the sentiments of institutions and retail investors will have to be kept in mind before proceeding with the IPO.
“We’re watching the VIX (India volatility index) for certainty in stability, and we have to be in the green before going ahead, but the 31 March deadline is no longer sacrosanct," he said. “Big investors have to cut the cheques, they have to be on board, but a good chunk of the IPO is for retail investors, and that needs to be fully subscribed, which means a large number of people will be investing in it," he added.
The official said any post-listing turbulence in share price may disappoint retail investors. “We would like to avoid such a situation," he said.
To ensure the IPO’s retail quota gets adequately subscribed, LIC agents are working overtime to ensure that its 280-million-plus policyholders have PAN so that they can link it with new or existing demat accounts and purchase LIC’s shares.
Mint had reported earlier that at least 70 million policyholders’ PANs have been matched with LIC policies and linked to demat accounts. Of this, at least 45 million policyholders have got fresh PAN numbers to be able to invest in the LIC IPO.
A total of 10% of LIC’s shares for retail investors will be reserved for policyholders, and they are likely to get a 10% discount on the IPO price.
The third official said the government was keen to go ahead with the IPO at the beginning of next fiscal. “We will try to do it before May."
Queries emailed to the spokesperson for the finance ministry remained unanswered till press time.
Though the Securities and Exchange Board of India has cleared LIC’s IPO in a record 22 days, the government needs a minimum of 15 days to sign on anchor investors before opening up the sale for retail investors and policyholders, and a delay will push the IPO to next month.
Shifting the IPO to April will impact the government’s asset sales goal and impact the fiscal deficit target. However, as the government expects fiscal spending to overshoot for FY23, the LIC IPO earnings may act as an additional buffer. “The buffer that we had kept in the budget for FY23 is already off as oil prices and fertilizer prices as assumed at the time of budget-making have already exceeded expectations. While they may come down during the course of the year, the LIC IPO may act as a buffer next year," the official added.
The success of LIC’s IPO is crucial for the government to meet its asset sales target, which was slashed by more than half to ₹78,000 crore for the current fiscal.
The cabinet has approved foreign direct investment of up to 20% under the automatic route in LIC to facilitate foreign investment in the insurer. DIPAM has been holding roadshows across markets, including the US, UK, Canada, Australia, and Japan, according to a fourth official, who also spoke on condition of anonymity. However, the exclusion of several Russian banks and entities from SWIFT is a major concern for global investors, as reported by Mint last week. Mint also reported that fund managers were against the government’s insistence to launch the IPO in March merely to curtail the fiscal deficit.
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