LIC's IPO will go ahead as planned, despite heightened uncertainty and higher volatility expected in financial markets as the war drags on.
Life Insurance Corporation's initial public offering will proceed as planned and will not be affected by the ongoing Russo-Ukraine conflict, while the war will continue despite expectations of near-term uncertainty and high volatility in financial markets.
The public offering of shares by India's state-run LIC, set to be the country's foremost, will test the depth of domestic capital markets, especially as financial markets face geopolitical conflict, and as the effects of the war in Ukraine. I'm nowhere close to being clear.
With financial markets expected to continue to fluctuate wildly, demand for LIC's public offering should be in play.
"LIC's IPO is India's most anticipated, so I don't think Russia-Ukraine conflict will have any impact on it. Yes, timing may not be right, but government will do it without any thought. Any change in LIC's plans The IPO will impact government finances,” said Vaibhav Agarwal, founder and chief investment officer, Teji Mandi.
"LIC's discount offer opened 34 lakh demat accounts in January. This shows the enthusiasm of Dalal Street," he said.
Financial markets have been on a roller coaster ride for the past week, tracking a dramatic increase in tensions in Europe. When the Russian president ordered his nuclear forces to be on high alert and Western countries responded with new sanctions, safe-haven stakes went up.
This week, more pain is expected for global risk assets, which have been predicted to have higher volatility. But volatility or risk aversion is unlikely to hamper LIC's IPO.
“On Thursday, there was a huge jump in the market, and on Friday it was over 2%. Considering this market condition, there is no need to worry about the listing of the behemoth. Finance Minister Nirmala Sitharaman on Tuesday Said there is interest in LIC IPO, and it will be launched as per the decision," Mr. Agarwal said.
"The market is volatile due to several reasons, but the central government needs to meet the fiscal target. Also, since the IPO was due for a long time, the chances of pushing the IPO to a later date are very slim," he added. .
The government is racing to complete the IPO by the end of March to meet its 2021/22 fiscal deficit target, which is required to finance its financial expansion plans set in the budget.
According to a Reuters report, India's cabinet approved a policy amendment allowing foreign direct investment (FDI) up to 20% in LIC, aimed at easing the listing of the state-run insurer.
The government expects the move, along with other simplifications in FDI policy, to "make India an attractive investment destination" and go ahead with listing of LIC's shares, which will go for subscription in the second week of March. should be opened.
The public offering of LIC shares is expected to open for anchor investors on March 11. The book will open for bidding by other investors a few days later.
But Lekh Chakraborty, a professor at the National Institute of Public Finance and Policy in New Delhi, said, "I think the global macroeconomic uncertainty arising out of the Russia-Ukraine crisis will adversely affect energy price volatility. These macroeconomic uncertainties are difficult to measure." Geopolitical tensions will further exacerbate macroeconomic consequences on inflation and interest rates."
“As far as the IPO is concerned, we have to take a decision in March itself. We need to see how the geopolitical situation will be.
Still, analysts suggested strong demand when asked about investor appetite for an IPO amid volatility in the financial market.
“When it comes to IPOs, investors remain excited. Many investors run out of shares to buy IPOs. Talking about LIC IPOs, investors have been eyeing it for a long time, and so are the policyholders. Many investors also want to make quick money, said MR Aggarwal of Teji Mandi in view of the current volatility in the market.
"I think investor appetite is increasing. Considering LIC's pedigree and efforts to initiate share sale, there is a lot of potential in the interest of investors," he said.