Even before the opening of issue, LIC is commanding a premium of Rs 45-55 in the gray 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 gray market, the current premium is only signaling 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 gray market for the LIC IPO as the issue is quite large,” the avid gray 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,
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).