Dubai: Are India’s stock markets and investors better off delaying the mega IPO from the Life Insurance Corporation of India (or LIC as it is popularly known)?
As more media reports started to emerge on Friday talking about a possible delay, India’s main stock market index, Sensex, reversed a 1,000-point plus drop and is now lower by 768 points. Sure, there would have been multiple reasons for the partial improvement, as investor sentiments are still fixated with what is happening in Ukraine.
The initial plan for the LIC IPO opening date was for next week. The issue size, estimated at anywhere over Rs10 trillion, would have made it the biggest stock market float in India.
One UAE-based investment analyst is, however, pleased with any delay to the LIC IPO. “Under the current circumstances, a full subscription to this massive IPO would have been quite difficult given what would have been a high offer price,” said K.V. Shamsudheen, Director at Sharjah-based Barjeel Geojit Securities. “If an IPO of this magnitude were to enter the market now, it will create a liquidity crunch and lead to a further decline the market.”
IPO timing
A decision on whether to delay is expected shortly. With the markets closing for the weekend, the government will have some breathing space to decide what’s best. A lot of expectation was riding on the LIC’s listing and the kind of proceeds that it would have generated.
Finance minister Nirmala Sitharaman has to take a bold decision to postpone to the next financial year (starting April 1). By all measure, it would be the appropriate decision.
“Yes, there was a lot of NRI (Non-Resident Indian) interest in the IPO – but many prospective investors fail to realise that this would vacuum up all available liquidity. And the wider market would have taken a hit.”
Investors fret
The onset of the Russia-Ukraine conflict and, in particular, oil’s surge past the $110 a barrel mark has investors worried. The fear is that a prolonged spell of oil at these levels would burden India’s economic growth just as it is picking up significantly after the pandemic phase.
According to Mitul Shah, Head of Research at Reliance Securities, “Domestic equity markets closed lower (on Friday) as the geopolitical scenario continues to worsen. Soaring crude prices due to supply disruptions from Russian sanctions have further escalated the situation.”
