LIC IPO: Russia-Ukraine Crisis Could Spoil India's Most Anticipated IPO

The Sensex and Nifty plunged into the red as a result of Russian President Vladimir Putin's military action against Ukraine. The fear that military escalation may lead to a lengthy bear market is becoming more ingrained with development.

The Indian market has also suffered from the Russia-Ukraine crisis. India's most anticipated IPO, LIC IPO, is about to launch in the market and it is expected that the government's plan to list LIC in March may come under increased pressure when the investor appetite globally will be ebbing due to the fall out of military operation. Despite all the buzz and the interest in the IPO of LIC slated to open in March 2022, market experts think that the timing of the issue may not be right given the recent headwinds that have triggered a sharp correction across global financial markets, including India.

Finance minister Nirmala Sitharaman, after addressing the FSDC meet, had said that the government will go ahead with the LIC IPO despite high volatility in markets due to geopolitical developments. The government will sell around 5% of the LIC for Rs 65,000 crore. Any change in plans can impact the government's finances.

The biggest concerning part of the whole situation is the 50% of the LIC IPO's net offer reserved for the anchor investors. LIC will allocate up to 60% of the qualified institutional buyers (QIBs) portion in the initial public offering to anchor investors on a discretionary basis, according to the DRHP filed by the insurer with SEBI. LIC has reserved 50% of the net offer (after excluding the portion reserved for policyholders and employees) for QIBs, 15% for non-institutional bidders, and 35% for retail individual bidders in accordance with the SEBI regulations.

Anchor investors are given shares in a firm ahead of an IPO to show that there is a solid demand for the stock and to entice other investors to the offering.Russia-Ukraine crisis could harm the LIC IPO's 50 reserved quota for the anchor investors. The Russia-Ukraine crisis has impacted the currency of the world's major economies. Also, the crisis resulted in the crude price hike. As a result, surging global crude oil prices will force oil retailers in India to revise local prices upwards that have been frozen for some time now.