The highly-awaited initial public offering (IPO) of the country’s largest insurer LIC is set to roll out within the next two weeks, likely before or by May 12, 2021.
At the same time, given the market volatility and now a muted demand from interested investors, given the over 2-month long ongoing Russia-Ukraine war crisis and the multi-year high persisting inflation and its upcoming impact of the US Fed set to raise interest rates to keep a check on the soaring inflation, the Government has cut the valuation of LIC’s IPO, stated sources knowledgeable of the matter.
However, despite having slashed the IPO size, more on which is covered further in the article, LIC’s public listing will still be the largest in the country, beating Paytm’s listing of Rs 183 billion on Nov 18, 2021.
LIC’s IPO Valuation Cut By Half Amid Geopolitical Tensions
LIC IPO was initially bound to launch before the financial year 2021-22 ends, i.e., before Apr 1, 2022. However, due to a sudden war breaking out between Russia and Ukraine, markets globally fell and there was high volatility introduced.
As a result, the finance ministry announced to shift the listing to early FY23. Now, the government is looking forward to conducting the IPO launch before May 12, as any later than that will have the insurer to file fresh papers all over again with SEBI, while providing its Q3 results and updating its embedded value.
At the same time, some government sources requesting to be unidentified, have informed that the Centre is mulling to slash the IPO valuation by about 40% compared to its earlier set number.
This means that LIC could now raise $3.9 billion or Rs 300 billion through the IPO, due to the ongoing Ukraine war denting the insurer’s valuation.
Earlier this month, the Centre was looking forward to raising Rs 500 billion through the public sale of LIC by offloading 7% of its 100% stake in the public insurer. However, the stake sale now could slightly more than 5% on muted demand from investors.
“We are planning to file a final offer document next week if we are able to solve all these issues by the end of this week,” stated a government source.
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