LIC IPO: On Saturday, LIC’s board approved the sale of 3.5 per cent stake in the company for about Rs 21,000 crore.
LIC IPO: In the midst of continuous sell-off in the stock market, the Government of India has decided to go ahead with the initial public offering (IPO) of Life Insurance Corporation of India (LIC) with very few targets. This could increase the risk of the country’s revenue deficit target.
The Board of Life Insurance Corporation of India (LIC) on Saturday approved the sale of 3.5 per cent stake in the company for about Rs 21,000 crore. Prior to the Russia-Ukraine war, the government wanted to raise about Rs 70,000 crore by selling its stake in LIC. Thus, the current target of the government is about Rs 50,000 crore less.
According to a Bloomberg report, anchor investors are also reluctant to invest as demand for the stock declines due to the war. This is also confirmed by the fact that so far this year, foreign investors have sold more than 16 billion from the Indian stock market.
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The government’s import bill has increased
The Indian government imports the most from abroad, including crude oil and gas. Due to the Russia-Ukraine war, their prices have risen significantly and the Indian government needs more money to import them. Expenditure has risen so much that it has become impossible for the government to meet the budget deficit by imposing higher taxes on petrol and diesel. If the government raises their prices, inflation will rise and this could lead to social unrest, which is already seen in some of India’s neighbors.
Details of LIC IPO will come by Wednesday!
According to reports, LIC is bringing in an IPO worth around Rs 6 lakh crore and this IPO may open in the first week of May. The issue price, date and other details of the LIC IPO are expected on Wednesday next week.
The government has lowered its investment targets
The central government last year set a target of raising Rs 1.75 lakh crore through investments. However, due to delay in LIC IPO listing, the government could not achieve this target by a huge margin. This year, the government has set a target of raising Rs 65,000 crore through investment, which, if successful, will help keep the budget deficit at 6.4 per cent of GDP.
What will be the effect of reducing IPO size?
“It will be difficult for the government to meet its deficit target as the size of the IPO is now too small,” said Kranti Bathini, a strategist at Mumbai-based Wealthmills Securities. “The Russia-Ukraine war has completely changed the mood of foreign investors who are now reluctant to invest. LIC’s IPO has been delayed, first by the Corona epidemic and later by the war. It is difficult to avoid further,” he said.
