LIC Life Insurance Corporation of India
India could shift IPO launch to next financial year, which starts April 1. Image Credit: AFP

Mumbai: The mega initial public offering of Life Insurance Corporation (LIC) of India is set to be delayed into the next financial year amid market swings triggered by Russia’s invasion of Ukraine.

Bankers and officials are preparing to shift the listing of the state-run insurer to after the current fiscal year, which ends in March. A formal announcement could be expected this week or next, they added, with one person saying the sale may happen as soon as April if market volatility eases.

LIC’s underwriters have seen muted interest during early meetings with potential anchor investors. Many fund managers have been wary of making major commitments amid the market volatility.

Market uncertainty

LIC’s IPO will be the biggest to be impacted by the war, which has wiped out 6 per cent of UK energy giant BP plc’s market value and over $3 trillion of global market capitalisation since tensions started rising from February 18. Indian Prime Minister Narendra Modi had sought to raise as much as Rs654 billion ($8.7 billion) from the deal to plug a gap in the budget deficit for the year through March 31.

India Finance Minister Nirmala Sitharaman said this week she would not mind taking another look at the timing of the LIC offering. Even if it does not pursue the share sale on the original timeline, the government is still hoping to complete the IPO in the next few months.

Massive setback

The deferment will be another setback for India, which has massively scaled down its asset sale target after the delay in privatisation of other state-run companies, including Bharat Petroleum. Modi’s administration had hoped to shrink the shortfall to 6.9 per cent of gross domestic product (GDP), with the LIC IPO accounting for some 3 per cent of revenue.

The government had also penciled in a record market borrowing for the financial year starting April 1. India had offered to sell a 5 per cent stake, or about 316 million shares in the insurer in what was seen as India’s ‘Aramco moment’. Just like the Gulf oil giant’s $29.4 billion listing, the world’s largest, LIC’s debut would test the depth of the nation’s capital markets and global appetite for the state-owned entity.