LIC IPO: Grey market premium tumbles 90 percent from high

NEW DELHI: As the much buzzed initial public offering (IPO) of Life Insurance Corporation of India (LIC) closed for subscription on Monday, demand for its shares in the grey market nosedived.

In the unofficial market, shares of LIC were exchanging hands at a minuscule premium of Rs 8-10 per share over the issue price, which is 90 per cent below the premium of Rs 100-105 per share it was commanding a week earlier.

Dealers tracking the grey market said lower participation from big investors and muted market sentiments are hammering LIC’s listing prospects.

LIC IPO was overall subscribed 2.95 times. The portion for policyholders was subscribed 6.12 times, followed by 4.4 times bidding for employee quota. HNI and QIB quotas were subscribed over 2 times, while the retail portion failed to fetch double the bids over allocation.

Investors made bids for roughly Rs 60,000 crore for the Rs 20,557 crore issue, which was quite less than what the Street was expecting. Due to this dull bidding, the insurance behemoth slipped in the grey market.

Abhay Doshi, Co-founder, UnlistedArena said despite reasonable valuations, it was not an opportune time for LIC to come out with its IPO. “Lower subscriptions, coupled with market volatility, added fuel to the fire,” he added.

The company sold its shares in the range of Rs 902-949 apiece, with a discount of Rs 60 per share to the eligible policyholders and Rs 45 per share to retail bidders and eligible employees of the company.

LIC IPO was the largest public offering in the domestic primary markets as the government sold 22.13 crore shares or 3.5 per cent stake of the company, valuing it at Rs 6 lakh crore, about 1.12 times the embedded value of Rs 5.4 lakh crore.

Varun Sridhar, CEO, Paytm Money said, “LIC pulled off the biggest IPO in the history of Indian markets, with more than 7 million applications. We advise investors to think from a medium to long term on IPO stocks.’

However, the government is quite elated by the response LIC’s primary offering received. DIPAM secretary Tuhin Kanta Pandey informed that the allotment of LIC IPO will take place on May 12.

Bidders in LIC IPO will be allocated shares on May 12, and the insurance behemoth will be listed on stock exchanges on May 17, DIPAM Secretary Tuhin Kanta Pandey said on Monday. Briefing reporters after closing of the issue, Pandey said the LIC IPO has met with tremendous success across all the segments.

B Gopkumar, MD & CEO, Axis Securities said the LIC IPO received phenomenal participation from retail investors, as anticipated, thanks to the better discounts offered to the investors falling in these categories.

“We have seen this IPO acting as a stimulus in driving retail participation in equity markets,” he added.

“We continue to believe that the LIC will be a good long-term bet and will play well on the growth story of the underpenetrated insurance industry.”

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