The capital market regulator, Securities and Exchange Board of India (Sebi), has approved the much-awaited LIC initial public offering (IPO). The approval comes within a month of LIC filing its draft red herring prospectus (DRHP) on February 12, 2022.
The government is planning to meet its revised disinvestment target of Rs 78,000 crore from this IPO. According to the Department of Investment and Public Asset Management (DIPAM) data, the government has received disinvestment receipts of Rs 12,029 crore so far. Considering the revised estimate of Rs 78,000 crore, the government is still falling short by around Rs 66,000 crore from its revised estimate.
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Despite its regulatory approval, the government may push the LIC IPO launch to the next financial year considering the on-going Russia-Ukraine crisis. On the back of this crisis, equity market sentiment is not upbeat at present. Since Russia’s invasion of Ukraine on February 24, 2022, the equity markets have fallen by more than 6 per cent. In the last many trading sessions in the Indian equity market, foreign portfolio investors (FPIs) have been net sellers, selling Indian equities worth a net of Rs 30,141 crore since the beginning of the month. The net outflow since January 1, 2022 now stands at Rs 99,036 crore.
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Last week, 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. Market experts are also of the view that, considering the market volatility, this may not be the opportune time to launch this mega IPO. A person familiar with the IPO process told Outlook Money that the government is likely to defer the IPO launch.
LIC is India’s largest insurance company, with a 65 per cent market share in both total and new premiums in a country with low insurance penetration. It has an enviable number of individual agents (1.35 million), which is 55 per cent of all individual agents in India as on September 30, 2021. It is also India’s largest institutional investor, with a 4 per cent stake in stocks listed on the National Stock Exchange (NSE).
LIC’s embedded value is Rs 5.39 trillion (Rs 5.39 lakh crore) as of September 30, 2021.
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