Will the LIC IPO Get Delayed to Next Financial Year?

The LIC IPO was supposed to be the big event of the financial markets in this year. The DIPAM Secretary, Tuhin Kant Pandey, had tweeted on Friday expressing confidence that the IPO of LIC would happen in the current fiscal year itself.

However, investment banking experts and government insiders are beginning to express scepticism. They are now veering around to the view that the LIC IPO in FY23 would be more realistic and doable.

What exactly has changed for the LIC IPO? First and foremost, there is a lot of scepticism about the current market conditions. The Fed hawkishness has created a situation which is not exactly conductive to equities. 
Remember, the LIC IPO is likely to be upwards of Rs.70,000 crore and has to be meticulously planned. With FPIs turning risk-off, it may be a tough job to get the requisite QIB and anchor support for the LIC IPO.

The second big concern is that the valuation is yet to be agreed upon. The actuarial valuation, which was the basis for the IPO valuation, was substantially delayed due to the complexities involved.

Without that basis from Milliman Advisors, the pricing would have been tough to arrive at. Then there are follow-up actions like taking the feedback of the institutions, road shows, getting retail feedback from brokers etc. And, market conditions have hardly helped.

Above all, there are still some important parts of the IPO process that is pending. For example, it is not yet clear when LIC will file its DRHP with SEBI. There is also an element of uncertainty over whether the multiple levels of approvals can be completed.

Check - LIC IPO Government Approval

The LIC IPO needs the prior approval of SEBI as well as IRDA, which is the insurance regulator. While LIC is covered under the LIC Act, operational issues are regulated by IRDA.

If the issue gets postponed, it could be a setback for the government disinvestment program. The government was targeting to raise close to Rs.175,000 crore via divestments this year and now it looks like the two biggest sources of divestment viz. LIC and BPCL, will not happen in FY22.

That would mean the government would be left with a much bigger challenge on bridging the expenditure gap, putting further pressure on resources.

Eventually, it would be the tepid and uncertain market conditions that would most likely result in the IPO being put off to next financial year.

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