lic ipo gray market: LIC commands a decent premium on the gray market, experts say it’s too early to rush

New Delhi: As soon as the long-awaited initial public offering (IPO) of India’s Life Insurance Corporation (LIC) was announced, the gray market began buzzing about India’s largest ever primary issuance.

Even before the opening of the issue, LIC has a premium of Rs 45-55 on the gray market, which is about 5-7 per cent above its price band of Rs 902-949 per share. It’s a decent prima facie case for such a big problem.

The country’s largest life insurance player will launch its initial stake sale between May 4-9 to raise around Rs 20.6 billion from investors. Despite the truncated size, it will still be the largest IPO ever in India.

According to dealers and various websites that track the gray market, the current premium only indicates initial trends and you should wait and see how things develop regarding the LIC issue.

Abhay Doshi, co-founder of UnlistedArena, said the initial signs are healthy, but the problem is quite big and the company has decent weight in the unlisted market.

“One shouldn’t focus too much on the gray market for LIC IPOs, as the problem is quite big,” the avid gray market tracker added. “Let the topic open up and see the investor interest in the topic. It’s too early to say anything.”

The Indian government will sell Rs 22.13 crore of LIC, which adds up to a 3.5 per cent stake in the company. Previously, the company was considering shedding a 5 percent stake in the company.

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

Half of the shares of the net issue are reserved for Qualified Institutional Buyers (QIBs), 15 percent of the shares will be reserved for non-institutional investors, while the remaining 35 percent will be allocated to retail investors.

Other market insiders said there is a lot of hype around LIC’s IPO and investors have the option to be shareholders in India’s largest insurer and one of the biggest companies India has produced.

Varun Sridhar, CEO,

Money said that regardless of the share price, LIC’s IPO will have a significant impact on market indices and mutual fund holdings that will effectively make their way into the investment portfolios of most investors.

“We advise investors to think about their asset allocation, their exposure to the insurance sector and to take a long-term view. Short-term pricing should not be the goal of LIC’s IPO,” he added.

The valuation of the state-owned insurance giant is pegged at Rs 6 lakh crore. This valuation is about 1.12 times the embedded value of Rs 5.4 lakh crore.

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

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