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March 7, 2022updated 23 Mar 2022 11:25am

Ukraine conflict could impact FII participation in LIC IPO

Understand the impact of the Ukraine conflict from a cross-sector perspective with the Global Data Executive Briefing: Ukraine Conflict

Investment by foreign institutional investors (FIIs) in the LIC IPO could be hit amid Russia’s invasion of Ukraine and subsequent punitive actions, reported Mint.

Citing two government officials,  the publication said that foreign investors may have to suffer impediments in participating in the IPO amid the ongoing conflict.

“US investors, for instance, with investments in the Russian market are not in a position to withdraw any securities and invest them in something like an LIC; so, for global investors, it has become an issue,” the publication quoted one of the officials as saying.

Last week, the Union Cabinet gave the go-ahead for up to 20% FDI in LIC.

Plans are on to conclude the listing by 31 March. However, amid surging oil prices and a volatile stock market, concerns over the timing and success over the IPO have increased.

According to Mint, India’s nearly $10bn (INR780bn) divestment target for FY22 is likely to be missed if the IPO is delayed.

The publication quoted one of the officials as saying: “Escalating prices of crude oil which impacts inflation and volatility in the Indian markets as a fallout of the ongoing crisis are also being weighed by the government in deciding the timing.”

Efforts are reportedly on so as not to significantly delay the share sale process as it could hinder the momentum gained in discussions with potential investors.

LIC has not yet taken a call on the IPO’s offer price.

By March, the government intends to raise INR750bn by offloading its 5% interest in LIC.

Department of investment and public asset management (DIPAM) secretary Tuhin Kanta Pandey was quoted as saying that the timing would be decided considering investors’ best interests.

“We are closely watching (the situation), and since you are dealing with the market all the time, we have to be watchful and make our strategy accordingly,” he stated.

In retaliation to its military aggression, the US and Europe have imposed several sanctions on Russia.

Recently, the UK unveiled plans to ban Russian firms from its aviation/space insurance market while Generali decided to wind down its Russian operations.

Meanwhile, China has directed its key state-owned insurance firms to carry out urgent checks regarding their exposure to Russia and Ukraine and report such dealings. 

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