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Has the virus put govt’s LIC IPO plan in peril?

Coronavirus outbreak has put the government’s ambitious LIC IPO plan in peril, a source aware of the matter has told PSU Watch

Has the virus put govt’s LIC IPO plan in peril?
Has the virus put govt’s LIC IPO plan in peril?
  • As the market continues to be in a volatile state, there’s too much uncertainty about whether the investor appetite will be enough for an IPO of this size, the source said

  • The news comes exactly a month after the government ended the previous financial year (FY2019-20) with a disinvestment yield of Rs 50,298.64

New Delhi: Coronavirus outbreak has put the government’s ambitious LIC (Life Insurance Corporation) IPO plan in peril, a source aware of the matter has told PSU Watch on the condition of anonymity. The news comes exactly a month after the government ended the previous financial year (FY2019-20) with a disinvestment yield of Rs 50,298.64 crore, which was short of the target of Rs 65,000 crore by around Rs 15,000 crore.

The LIC IPO plan in peril

The source said, “The LIC IPO will be huge. And the market is in poor condition right now. There are several issues that we will have to consider before launching it. Will there be enough appetite? We don’t know. There is too much uncertainty right now.”

“As far as the government is concerned, there is no change in its disinvestment plans for FY2020-21. There are two components of the plan. One is strategic disinvestment and OFS which is expected to fetch Rs 1.11 lakh crore. And the other is the LIC IPO which is expected to yield Rs 90,000 crore. If at all changes will be made to the plan or not will depend on the future course of events. It will depend on bidders and on market conditions. So, for now, we can only wait and watch,” the source added.

The backdrop

For FY2020-21, the government has set a disinvestment target of Rs 2.1 lakh crore. The LIC IPO is expected to contribute a big chunk towards the total tally. It is the second-largest issue after Coal India in 2010. However, with the market continuing to be in a volatile situation, the IPO plan certainly faces a lot of uncertainty. Before announcing the issue, the government will have to amend the LIC Act and convert LIC to a company under the Companies Act.