The much-awaited initial public offering (IPO) of government-owned insurance behemoth Life Insurance Corporation of India (LIC) is expected to hit the market on March 11, and there are compelling reasons to believe so. Here are three such reasons.
Federal Reserve Meet
Investors across the world are rattled by the fear that the US Federal Reserve could hike interest rate. The next Federal Open Market Committee (FOMC) meet is scheduled on March 15-16, 2022.
FOMC after its January 2022 meet reiterated much of what they said post the December 2021 meet. In December 2021, FOMC said it would end its pandemic-era bond purchases in March and pave the way for three quarter-percentage-point interest rate hikes by the end of 2022 as the economy nears full employment and the US central bank copes with a surge of inflation. Interestingly, the consumer price inflation in the US is running at a 40-year high.
Market experts believe that the Fed starts its rate hike from March as signalled in its last two meets. This will spoil the market mood across the globe. “Considering the monster size of the (LIC) IPO, the government would not like to take any chance with market volatility post the Fed meet,” the head of research of a broking house told Outlook Money, on the condition of anonymity.
The government would not like to have the IPO subscription closing date beyond March 14, 2022 to insulate the IPO from rate hike impact, if any. Typically, there is a gap of two-three days between the opening and closing dates. If we apply simple mathematics here, for a closing date of March 14, a day before the FOMC meeting, the IPO would have to open before March 11.
Disinvestment Target
Another reason for the LIC IPO to open before March 11 could be the fact that the government needs to meet its disinvestment target of Rs 78,000 crore in the current financial year. According to the Department of Investment and Public Asset Management (DIPAM) data, the government has disinvestment receipts of Rs 12,029 crore till date. Considering the revised estimate of Rs 78,000 crore, the government is still falling short by around Rs 66,000 crore from its revised estimate. This makes another compelling case for the government to come out with the LIC IPO soon as they will require the money before March 31, 2021.
There is a provision of Applications Supported by Blocked Amount (ASBA) for IPO application, so the issuer of IPO gets money only after the allotment is finalized. Considering a window of 10 days, the government will get the LIC IPO proceeds either on March 24 or 25. Even a delay of one day will push it further, as March 26 and 27 are bank holidays.
Street Speculation
Speculation is synonymous with the stock market. When asked about the IPO launch date, people closely associated with this IPO process told Outlook Money that “sometimes speculation works”. He hinted that the speculative date is tentatively the same—March 11.
All these factors indicate that the LIC IPO will hit the street on March 11, 2022. It is time for you to prepare for the mega launch of LIC IPO if you wish to participate in it.
