Govt planning mega LIC IPO by mid-May after markets calm down: Report

A market volatility index for India around 15 will be a comfortable level for the government to launch the IPO, says a source

India is looking at a mid-May timeline for launching the mega initial public offering of its largest insurer with hopes that the market volatility triggered by Russia’s invasion of Ukraine will subside, according to people familiar with the matter, Bloomberg reported.

Life Insurance Corp.’s published embedded value will be valid for the IPO until May as per rules, said the people, who declined to be named as the information is not public yet. A delay beyond that would mean LIC would have to re-calculate the embedded value, a key valuation gauge for insurance firms, based on the latest financials, they said.

The IPO, which was set to launch before end of March, forms a key part of Prime Minister Narendra Modi government’s plan to divest state assets to fund a yawning budget deficit. With market swings triggered by the war, what could be the country’s biggest IPO was delayed into the next financial year, Bloomberg News reported earlier this month.

A market volatility index for India around 15 will be a comfortable level for the government to launch the IPO, one of the people said. India NSE Volatility Index was at about 26 in Mumbai on Monday, higher than an average of 17.9 in the past year. It touched the highest level this fiscal year at 31.98 on Feb. 24.

A Finance Ministry spokesman couldn’t be immediately reached for a comment.

The government had sought to raise as much as Rs 65,400 crore from selling a 5% stake in the insurer. Plans for the IPO were first announced by Finance Minister Nirmala Sitharaman in February 2020, but was deferred due to the pandemic.

The IPO's delay is one of the biggest fallouts in Asia's capital markets from the Ukraine crisis as it was slated to be one of the biggest insurance IPOs globally this year.

A senior government official told Reuters that the government would also wait to see the impact of expected monetary tightening by the US Federal Reserve, which could adversely affect Indian stock markets, pushing away foreign investors.

The Fed is widely expected to raise interest rates by a quarter of a percentage point at the end of its two-day policy meeting on Wednesday.

Deferring the LIC listing to the next financial year, which starts on April 1, will also help the government to meet its targeted fiscal deficit of 6.4% of GDP in the coming fiscal year as proceeds from the IPO boost its revenue, the official said.

"Surely, the LIC listing in April will be a major positive for government revenue," the official said.