Ukraine crisis may dampen foreign investor interest in LIC public issue

LIC is yet to decide on the offer price for the listing, but the IPO is poised to be the largest in Indian stock market history and is crucial for the Centre to meet its Rs 78,000 crore divestment target for FY22

Sanctions imposed on Russia for its invasion of eastern Ukraine will likely dampen participation from foreign institutional investors (FIIs) in the coming initial public offering by LIC, according to a report published in Mint.

Two sources told the paper that the sanctions have become an “issue for global investors”.

Russia has been faced with a barrage of united sanctions from the US and Europe for its movements in Ukraine, including ejection of several banks from financial messaging platform SWIFT, leading to tightening of investor funds.

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One source pointed out that US investors with interests in the suffering Russian market are “not in a position to withdraw any securities and invest them in something like an LIC”.

Moneycontrol could not independently verify the report.

“Escalating prices of crude oil which impacts inflation and volatility in the Indian markets as a fallout of the ongoing crisis are also being weighed by the government in deciding the timing. (But) the government does not want to delay the IPO too much as it may lose the momentum gained in talks with potential investors and bankers," a second official said.

Top officials are “in discussion to decide on the timing of the IPO”, the report said.

The government is looking to shed 5 percent stake in the national insurer by March-end to raise Rs 75,000 crore. However, questions over whether this timing will affect the IPOs success have risen due to rising oil prices and unstable stock conditions globally while the war persists.

LIC is yet to decide on the offer price for the listing, but the IPO is poised to be the largest in Indian stock market history and is crucial for the Centre to meet its Rs 78,000 crore divestment target for FY22. If the listing fails to be completed by March 31, 2022, this target will not be fulfilled.

The finance ministry did not respond to queries, the story said.

Earlier on March 4, Department Of Investment and Public Asset Management (DIPAM) Secretary Tuhin Kanta Pandey had stated that the government would “take a call” on the timing of the IPO, “keeping in mind the best of interest of investors”. He noted that “certain unanticipated events” made an impact, adding that they are watching the market “closely, and, certainly, whatever the government will do, we will do in the best interest of investors and also the IPO”.

Pandey said the aggression in Europe has “created a dynamic situation” and the approach to making a strategy will be “watchful”.