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’s struggle with inflation – have profoundly affected the Indian market. The Sensex and the Nifty50 index declined 5% last month. Moreover, private insurance companies have also plunged nearly 13% over the previous month.
The SEBI has cleared the IPO this week, and now the centre and the merchant bankers 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 advise 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 in India.
Should You Be Concerned?
LIC owns over 19% of government bonds, more prominent than the RBI. But then there are causes of concern. Like, LIC’s value of new business (VNB) margin is single-digit 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 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, it only makes sense for LIC to launch its IPO next year. The valuation will be impacted by current market conditions, leading to a lacklustre listing.
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-Team Teji Mandi