India’s biggest IPO – LIC – hit by Russia-Ukraine war

India’s biggest IPO - LIC - hit by Russia-Ukraine war

India’s biggest IPO - LIC - hit by Russia-Ukraine war

FM says she needs to go back and review the situation

New Delhi, March 1 (Delhi Crown): The much-awaited mega IPO (initial public offering) of the Life Insurance Corporation (LIC), which was expected to take place in the first half of this month, would most probably be delayed due to the ongoing Russia-Ukraine full-fledged war, the country’s finance minister has hinted.

The LIC public issue is expected to be the biggest IPO in the history of the Indian stock market. So far, the amount mobilised from the IPO of Paytm in 2021 was the largest ever at Rs 18,300 crore, followed by Coal India (2010) at nearly Rs 15,500 crore and Reliance Power (2008) at Rs 11,700 crore.

In an interview with a business newspaper on Tuesday (March 1), the country’s Finance Minister Nirmala Sitharaman was quoted as saying – “When I last commented on this matter, the tension was building up. Now there’s a full-scale war. Therefore, I need to go back and review the situation.”

She said ‘ideally’ the Government of India would like to go ahead with the IPO, however if global circumstances demand, “she won’t hesitate to look into it again”.

The conflict in eastern Europe has impacted global stock markets, including the India’s markets – BSE Sensex and NSE Nifty, and international oil prices. Several experts have cautioned that global inflation level may go up due to Russia’s invasion of Ukraine.

The Modi government’s cabinet had last week permitted up to 20% FDI under automatic route in IPO-bound LIC with the aim of facilitating disinvestment of the country’s largest insurer. The LIC had on February 13 filed draft papers with capital market regulator SEBI for the sale of 5% stake by the Government of India for an estimated Rs 63,000 crore.

The LIC IPO of over 31.6 crore shares, or 5% government stake, is likely to hit D-street in March.

According to the draft red herring prospectus (DRHP), LIC’s embedded value, which is a measure of the consolidated shareholders value in an insurance company, has been pegged at about Rs 5.4 lakh crore as on September 30, 2021, by international actuarial firm Milliman Advisors.

Although the DRHP does not disclose the market valuation of LIC, as per industry standards, it would be about three times the embedded value or around Rs 16 lakh crore.

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