Govt eager, however some regulators increase considerations on LIC IPO timing

Even because the Department of Investment and Public Asset Management (DIPAM) is learnt to be eager on launching the LIC preliminary public providing in March 2022 to fulfill its revised disinvestment goal for the present fiscal, some key regulatory sector officers have been advocating towards the transfer, citing low share of policyholders having PAN linked to their insurance policies and even decrease numbers having demat accounts. There are additionally contemporary considerations over geopolitical developments in Russia-Ukraine and its influence on markets, FPI outflow during the last couple of months, volatility in markets and March not being a proper month for a big public problem.

Atleast two key officers indicated that the timing may very well be inopportune for the LIC IPO on account of a number of components.

“The main concern comes on account of policyholders. While there are close to 30 crore LIC policyholders, less than 4 crore have their PAN linked to their policies. Even lower numbers have Demat accounts. Though LIC has been pushing its policyholders to link their PAN with their policies and policyholders to open Demat accounts, we are not sure if enough has happened on that front,” mentioned one supply. He added the present market volatility additionally doesn’t augur effectively for a big problem.

Another official who didn’t want to be named cited the general weak spot available in the market and sharp outflow of FPIs as one more reason for not popping out with the LIC IPO now. Over the final two months, FPIs have pulled out a internet of over Rs 64,461 crore. “Generally, March is not a good time for a large issue as companies have to file their advance taxes and so the liquidity is low in the market. Also, while the market has been weak over the last couple of months and FPIs have pulled out large sums of money from Indian equities, the recent geopolitical concern comes as a fresh concern,” he mentioned.

He added whenever you come out in a uneven market with a big problem, “you not only run the risk of undersubscription but also are not in a position to command a good price or premium and hence would lower your realisation. You should not come with the IPO just because you want to achieve the disinvestment target for the year. I don’t think that would be the right call,” mentioned the official.

LIC is anticipated to boost round Rs 60,000 crore from its public problem. Last week, LIC Chairman MR Kumar had expressed his keenness to launch the IPO within the present fiscal itself. “We are watching the geopolitical developments very closely. We are keen on listing in March,” Kumar mentioned final week, referring to the market volatility and developments in Ukraine.

However, the ultimate resolution on the IPO launch might be determined by the federal government in session with the funding bankers and LIC. On February 24, the Sensex crashed by 4.7 per cent (2,702 factors) when Russia invaded Ukraine however recovered partially by 2.44 per cent (1,329 factors) the following day. As the markets are prone to stay unstable within the coming days, any additional steep fall can influence the IPO pricing.

Meanwhile, authorities departments and different stakeholders have been making ready the grounds for the general public problem to be launched in March.

On Thursday, index upkeep sub-committee of NSE Indices Ltd determined to loosen up the eligibility standards of Nifty fairness indices, lowering the minimal itemizing historical past of constituents from three months to at least one calendar month. While the adjustments might be efficient from March 31, market sources say the relief will pave the best way for the inclusion of Life Insurance Corporation (LIC), which plans to listing its shares in March, within the benchmark Nifty 50 Index after a month of its itemizing.

In one other transfer, the Union Cabinet on Saturday cleared an modification to the FDI coverage to permit international direct funding (FDI) as much as 20 per cent beneath the “automatic route” within the state-owned Life Insurance Corporation. “The change in FDI policy is sufficient to facilitate foreign investment in LIC up to 20 per cent,” mentioned a authorities official, noting that an modification to the LIC Act, 1956, was not required. According to the provide doc, as a lot as 50 per cent of the IPO might be allotted to certified institutional buyers (QIBs). It has allotted 5 per cent of the provide for workers, 10 per cent for eligible policyholders and 35 per cent for retail particular person debtors (RIBs).

Bankers expect a very good response from QIBs and retail buyers. Investment banking sources mentioned as soon as Sebi approves the problem within the coming days, the IPO will open for subscription in March second week and buying and selling will start by the third week of March 2022 as per the present plan.