SEBI clears LIC IPO, over to the government now

The Securities and Exchange Board of India on Tuesday approved the initial public offer of LIC, thereby paving the way for the government to launch the issue through which it plans to raise around Rs 60,000 crore.

“Sebi approved the LIC public issue late on Tuesday evening and now the government has to decide when it wants to launch the issue,” said a source close to the development.

Even as the regulatory approval for the issue has come, investment banking sources close to the development say that the IPO may get deferred given the ongoing geopolitical developments and its impact on equity markets and investor sentiment worldwide.

“The decision rests with the government, however, I don’t think that it is the right time to come out with a large public issue as that of LIC when the markets are under pressure and investor sentiment has taken a beating,” said an investment banker who did not wish to be named.

Earlier this month, Finance Minister Nirmala Sitharaman had said that while she would like to go ahead with the LIC IPO as planned, she wouldn’t mind looking at it again given the global considerations.

It is important to note that the benchmark Sensex has crashed by over 6.5 per cent since the Russian invasion in Ukraine beginning February 24. The FPIs too have been in an exit mode. While they have sold Indian equities worth a net of Rs 30,141 crore in March alone, the net outflow since January 1, 2022 now amounts to Rs 99,036 crore.

On March 1, The Indian Express reported that even as the Department of Investment and Public Asset Management (DIPAM) was keen on launching the LIC initial public offering in March 2022 to meet its revised disinvestment target for the current fiscal, some key regulatory sector officials have been advocating against the move, citing low percentage of policyholders having PAN linked to their policies and even lower numbers having demat accounts.

There are also fresh concerns over geopolitical developments in Russia-Ukraine and its impact on markets, FPI outflow over the last couple of months, volatility in markets and March not being a right month for a large public issue.

“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,” said one source.

He added the current market volatility also does not augur well for a large issue.

Another official cited the overall weakness in the market and sharp outflow of FPIs as another reason for not coming out with the LIC IPO now. “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 said.

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