Do you see the LIC IPO happening in March this year or will it get pushed off to next fiscal year?
Answer
Answer
The way the markets are behaving, unless something drastically changes in the next one week, the LIC IPO is starting to look impractical in fiscal 2021-22. Of course, the finance minister and the other government officials continue to be confident, but there seems to be a lot of optimism in these statements. As the war intensifies in the Ukraine region, the LIC IPO is appearing to be more and more ambitious in the next few days.
Almost everything that can go wrong for the markets has gone wrong. Ukraine Russia war has impacted trade routes, sanctions have been imposed by the West and oil prices have spiked briefly beyond the $100/bbl mark. Even the rupee plunged to beyond 76/$ even as foreign institutions have sold $29 billion in this year with over $22 billion since October 2021. Even if a full-fledged war looks unlikely, this is not the best time for a mega IPO.
One factor that will play on the mind of the government is the way FIIs are rushing for the exits. In FY22, till date, FIIs sold $29 billion in equities, of which $22 billion of FII selling happened since October 2021. FIIs are worried about valuations, bond yield risk, inflation spikes and rising oil prices. In the midst of the Ukraine stand-off, any change of heart from the FPIs looks unlikely. So, the enthusiasm of FIIs to invest in LIC IPO may be quite low.
A good option is to put off the LIC IPO to FY23. It is now time to action Plan-B. The IPO must close before 15-March, if listing must happen in FY22. That leaves just 10 days to put all the blocks in place ahead of the LIC IPO. That is impractical, to say the least. A wiser option is to put off the LIC IPO to the next fiscal. Disinvestment targets are statements of intent and not carved in stone. Putting off the IPO to FY23 gives more time and more room.