Teji Mandi Explains: What’s next in LIC IPO?

Teji MandiUpdated: Monday, March 14, 2022, 04:26 PM IST
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Teji Mandi Explains: What’s next in LIC IPO? | (Photo by SUJIT JAISWAL / AFP)

LIC IPO is the elephant in the room that has gone quiet. The current market condition has delayed the IPO and investors’ hope too.

What’s Happening?

You can never time the market. True, but IPOs are always timed during bullish market conditions. You will hardly ever see an IPO that has been launched during a bear market. Similarly, the current market condition and the recent past has cautioned LIC. Big companies like Paytm too had to take a plunge. The government had planned to launch LIC IPO in March 2022 but unforeseen events - the Ukraine-Russia war and the US grappling with inflation has affected the Indian market deeply. The Sensex and the Nifty50 index have declined 5% in the last one month. Moreover private insurance companies have also plunged nearly 13% over the last one month.

The SEBI has cleared the IPO this week and now everything lies on the table of the Centre and the merchant bankers, who are planning to meet this week to take a final call. Since the market has been choppy for the last two months, the investment bankers are advising the Centre to hold the launch. The Department of Investment and Public Asset Management (DIPAM) Secretary Tunhin Kanta Pandey said that as soon as the market volatility recedes, the IPO will be launched. So, now we know when to expect the biggest IPO of India.

Should You Be Concerned?

LIC owns over 19% of government bonds, making it bigger than the RBI. But then there are causes of concern. Like, LIC ‘s value of new business (VNB) margin is in single-digit as compared to the private players. LIC’s financial parameters and market share are lower than its peers. It has its own set of risks but it is expected that the issue will bring transparency to its operations and rationality in its business decisions. It could surprise the Street positively post-listing.

What Lies Ahead?

If the market remains volatile then it only makes sense for LIC to launch its IPO next year. At current market conditions, the valuation will be impacted leading to a lacklustre listing.

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