Govt to reassess LIC IPO timing in view of Ukraine crisis

BL New Delhi Bureau | Updated on: Mar 02, 2022

To meet the curtailed divestment target, the government was expecting to mop up ₹63,000 crore by selling 5 per cent stake in the LIC

With Russia-Ukraine war showing no signs of abating, the government is reassessing the timing of LIC-IPO to get the maximum value of its holding in the State-owned insurance behemoth.

“It’s a full blown war now, so we will have to assess the situation for going ahead with LIC IPO,” highly-placed Government sources said.

Finance Minister Nirmala Sitharaman, too, had indicated a review of the LIC IPO timing given the evolving geopolitical situation. “Ideally, I would like to go ahead with it because we had planned it for some time based purely on Indian considerations,” Finance Minister Nirmala Sitharaman had said in an interview with BusinessLine on Monday. “But if global considerations warrant that I need to look at it, I would not mind looking at it again,” she had said.

Ukraine-Russia War entered its seventh day on Wednesday, with fighting intensifying in Kyiv and in other big cities.

The government was expecting to mop up ₹63,000 crore by divesting 5 per cent stake in the life insurance firm to meet the curtailed disinvestment target of ₹78,000 crore in the current fiscal. If the initial public offering (IPO) is deferred to the next fiscal, the government would miss the revised disinvestment target by a huge margin.

So far, the government has raised ₹12,030 crore through CPSE disinvestment and Air India strategic sale this fiscal. The government had earlier projected to garner ₹1.75 lakh from disinvestment during 2021-22.

The IPO is offer for sale (OFS) by the Government of India and no fresh issue of shares by LIC. It would be the biggest IPO in the history of the Indian stock market and once listed, LIC’s market valuation would be comparable to top companies like RIL and TCS.

Last week, the government had permitted up to 20 per cent foreign direct investment (FDI) under automatic route in IPO-bound LIC with an aim to facilitate disinvestment of the country’s largest insurer.

Foreign investors may be desirous of participating in the mega IPO. However, the existing FDI policy did not prescribe any specific provision for foreign investment in LIC, which is a statutory corporation established under the LIC Act, 1956.

Since as per the present FDI policy, the foreign inflows ceiling for public sector banks is 20 per cent under government approval route, it has been decided to allow foreign investment of up to 20 per cent for LIC and such other corporate bodies.

Published on March 02, 2022
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