The unprecedented market response to the listing of insurance giant Life Insurance Corporation (LIC) on the stock exchanges was a milestone in India’s financial markets that could prove to be a game-changer.
It has once again demonstrated Prime Minister Narendra Modi’s uncanny ability to convert adversity into an opportunity by making bold moves to push his development agenda. In the midst of widespread political and economic churning in the world following the Ukraine crisis, PM Modi has not only earned the respect for India’s independent foreign policy but also established the inherent strength of the Indian economy.
The decision to launch India’s largest IPO was put off in March due to heightened volatility in the markets as a result of the Ukraine conflict. But the Government’s confidence in the resilience of the national economy and the strength of its fundamentals emboldened it to rework the plan and launch it on May 4 without waiting for ideal market conditions.
It was a calculated risk, but it paid off. On the first day of the launch itself, the share quota for LIC employees was fully subscribed and the portion reserved for policyholders was subscribed 1.9 times. Modi’s critics have raised questions about the timing of the launch. Though the Ukraine conflict has continued and Foreign Portfolio Investors (FPIs) have been in pull-out mode, the Indian market has proved fairly resilient to the upheavals, with domestic investors cushioning its fall to less than 10 per cent.
The medium-term outlook for equities remains choppy with continued geopolitical tensions. There was no point in the Government putting off this marquee IPO indefinitely while waiting for sanguine market conditions to re-emerge. The Rs 21,000 crore IPO represents the highest-ever valuation for an IPO in the Indian market— prior to this, Paytm IPO saw the highest fundraiser last year at Rs 18,300 crore and Coal India in 2010 at Rs 15,200 crore.
By paring down the equity stake proposed to be disinvested from 5 per cent to 3.5 per cent and settling for disinvestment proceeds of ₹21,000 crore