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    LIC commands decent premium in grey market, experts says it's too early to jump the gun

    Synopsis

    Even before the opening of issue, LIC is commanding a premium of Rs 45-55 in the grey market, which is about 5-7% over its price band of Rs 902-949 per share. It is a decent prima facie premium for such a large issue.

    LIC IPO: All you need to know about India's largest public offering
    New Delhi: As soon as the much-awaited initial public offering (IPO) of Life Insurance Corporation (LIC) of India was announced, the grey market began buzzing over India's largest ever primary issue.

    Even before the opening of issue, LIC is commanding a premium of Rs 45-55 in the grey market, which is about 5-7 per cent over its price band of Rs 902-949 per share. It is a decent prima facie premium for such a large issue.

    The largest life insurance player in the country will launch its initial stake sale between May 4-9 to raise about Rs 20,600 crore from the investors. Despite the truncated size, it will still be the largest-ever IPO in India.

    According to the dealers and multiple websites tracking the grey market, the current premium is only signalling the initial trends and must wait and watch how things pan out over the LIC's issue.

    Abhay Doshi, co-founder of UnlistedArena said that initial signs are healthy but the issue is quite large and the company is commanding a decent weight in the unofficial market.

    "One should not focus much on the grey market for the LIC IPO as the issue is quite large," the avid grey market tracker added. "Let the issue open and see the investors' interest in the issue. It's too early to say anything."

    The government of India will sell 22.13 crore shares of LIC aggregating to a 3.5 per cent stake of the company. Earlier, the company was eyeing to offload a 5 per cent stake in the company.

    There is an employee reservation of 15.81 lakh shares while 2.21 crore shares are reserved for policyholders. Retail and employees will get a Rs 45 discount, while policyholders will get a Rs 60 discount per share.

    Half of the shares from the net issue are reserved for qualified institutional buyers (QIB), 15 per cent of the shares will be reserved for non-institutional investors while the rest 35 per cent is allocated to retail investors.

    Other market experts said that there's a lot of buzz around the LIC IPO and investors have the option to be a shareholder in India's largest insurer and one of the biggest companies that India has produced.

    Varun Sridhar, CEO, Paytm Money said that Irrespective of the share price, LIC going public will have a significant impact on market indices and mutual fund holdings effectively making its way into the investment portfolios of most investors.

    "We would advise investors to think about their asset allocation, exposure to the insurance sector and have a long term view. Short term price should not be the objective for the LIC IPO," he added.

    The valuation of the state-run insurance behemoth is pegged at Rs 6 lakh crore. This valuation is roughly 1.12 times the embedded value of Rs 5.4 lakh crore.

    LIC is the fifth largest life insurer in the world by life insurance gross written premium (GWP) and the 10th largest insurer globally by total assets. At the end of FY21, LIC had a 66 per cent market share in new business premium (NBP).






    ( Originally published on Apr 28, 2022 )

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    (What's moving Sensex and Nifty Track latest market news, stock tips, Budget 2024 and expert advice, on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds .)

    Subscribe to The Economic Times Prime and read the Economic Times ePaper Online.and Sensex Today.

    Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price

    ...more
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