LIC IPO: Ukraine crisis likely to impact foreign investor interest

Economic sanctions on Russia for its invasion of Ukraine are likely to affect participation from foreign institutional investors (FIIs) in the upcoming initial public offering (IPO) by Life Insurance Corporation of India Limited (LIC), according to a report by Mint.

Sources told the Mint that the sanctions have become an “issue for global investors”.

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In response to Russia’s actions in Ukraine, the US and Europe have imposed united sanctions on Russia including the removal of several banks from financial messaging platform SWIFT, leading to tightening of investors’ funds.

According to one source, US investors with investments in the struggling Russian market are unable to withdraw any securities and invest them in something like LIC.

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“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,” another source said according to the report.

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The Government of India is looking to sell a 5% stake in the LIC by March-end to raise around Rs 75,000 crore. However, the concerns over whether this timing will impact the IPOs success have risen due to escalating oil prices and unstable stock prices and unstable stock conditions globally while the war persists. Top officials are in discussions to decide on the timing of the IPO.

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LIC has not yet announced the offer price for the listing, but the IPO is expected to be the largest in Indian stock market history. LIC IPO is crucial for the centre to reach its Rs 78,000 crore revised disinvestment target for the financial year 2022-22. If the listing fails to be completed by March 31, 2022, this target will not be fulfilled.

Earlier on March 4, Department Of Investment and Public Asset Management (DIPAM) Secretary Tuhin Kanta Pandey had said that the government would decide on the timing of the IPO, keeping in mind the best interest of investors. He added that they are watching the market closely.