Several things have changed in the past few weeks for the share and Indian markets. The needs have cracked another pressure of the Ukrainian crisis as per the share market news. Oil has once against crossed $100/ BBL. And even the Indian rupee has gone up beyond INR 76 for dollars. FBI’s have sold around 22 billion dollars since October the previous year in the latest reservations on the algo case have been disconcerting. Questions are being raised in such a condition as to whether the lic IPO is practical currently or not.
Currently, the plants have no changes, or that is what the finance minister has indicated. But Nirmala Sitharaman Hastened to add that volatility in the market was due to international factors, and the government was indeed watching developments in Russia and Ukraine. The strong FII participation and strong market sentiment are the key factors considering the size of the lyc IPO at close to $10,000,000.
Is the government facing any challenges?
Yes, the government is currently facing several challenges when it comes to raising the debt in the bond markets. For example, if you look at February the central government has raised INR 10,525 crore through the bond issues against the scheduled target of ₹95,000 crores. The government has said that it does not need funds thanks to the comfortable cash position. But the ground reality is quite a significant mismatch between the government yields offered and what the markets are here to expect.
The only IPO success is crucial to the government for its divestment avenues. The government had downsized the divestment target for the financial year 2022 from ₹1,75,000 crore to ₹78,000 crores in 2022.
Only ₹13,000 crores have been erased to date, even out of the revised target. Hence the success of ₹65,000 crores IPO is almost sine qua for the Indian government to ensure that the funding offers at a healthy level. One of the cases that have been at the center of attention for the Indian government is the case about the erstwhile senior officials of the National Stock Exchange.
A healthy market system is essential to make a success of such a significant issue and the government would not want to take any chances with the issue size. The last few days have already seen quick action taken and the more is likely to follow Wonderland at the Indian markets are a safe place. But the finance minister has confirmed that the Russia Ukraine crisis was being closely watched as the international micro situation degenerated rapidly. At search times of political uncertainty, there is a natural risk of a tendency towards safe asset classes like gold and dollar-denominated assets. It is not conducive for the Indian government, which expects robust participation in the lyc IPO from institutions and retail.
Things to look further
Currently, the government roadshows for the LIC IPO are on complete swing and more clarity on the foreign investor appetite will emerge only after the road shows. The geopolitical situation is not likely to improve in the next one month so the lIC IPO is likely to have to move ahead in the shadow of the current conflict. Time is running out as the government aims to close the IPO by mid March so that it will able to list lyc in the March itself.
The government continues to execute confidence for now but the consolidated feedback from the roadshows will give a better picture. The government will not only be keen on good subscription response but also a strong listing for the stock in case of LIC.
The government is not quite keen to pursue the IPO unless that is insured and the next few days are quite critical for the fate of the lyc IPO.
The government sources of India are prepared to deal with any situation arising out of international developments, and they don’t see any impact of the crisis to be severe on the Indian economy. Reacting on whether the invasion of Ukraine by Russia could drive up uncertainties, but that is not likely to be possible currently. On February 24, the Russian troops launched an attack on the Ukraine government, which created havoc in the Indian markets.
Is the IPO likely to be postponed?
The government is expected to defer the mega initial public offering to the next financial year as the ongoing Ukraine Russia war has dampened the fund managers’ interest in the general issue. The government was looking forward to selling 5% stake in my life insurance corporation, which could have fetched more than ₹60,000 crores to the government.
The IPO could have helped meet the day’s investment target open around 78,000 crores this fiscal year. Generally, a high volatile markets where investors look forward to play safe and refrain from making any fresh investments. Thus the equity markets must be stable so that investors can get more confidence to make the investment in lic IPO.
The current market volatility is not conducive for the lyc IPO and the government is likely to defer the issue in the next fiscal year. The decision is not final yet because there are some experts who are saying that the Ukraine Russia war will not have an impact but it all depends on the situation and the geopolitical strategy.