Lic Gray Market: Growing Gray Market Demand Suggests Potential Trading Gains for LIC Shares

Mumbai: The gray market premium for Life Insurance Corp (LIC) shares has almost quadrupled in the last three days. According to market participants, LIC currently commands a premium of Rs90 on the gray market, which is about 10% above its price band of Rs902-949 per share.

The gray market premium was around ₹25 last Wednesday, just before the formal announcement of the IPO size and price band.

Mostly wealthy people and brokers engage in gray market trading. They became interested after the insurance giant’s valuation was lowered. The gray market premium is likely to rise further in the coming days before issuance opens on May 4, dealers said.

“The premium has been increasing every day after the formal announcement of LIC’s initial public offering,” said Tushar Bopche, co-founder of Investvalue Fintech, a wealth technology startup. “The valuation cut has caused euphoria among investors.”

The LIC valuation has been reduced from ₹12 lakh crore to ₹6 lakh crore, while the IPO size has been reduced from ₹60,000 crore to ₹21,000 crore due to adverse market conditions. The valuation based on the initial public offering price is about 1.12 times the embedded value of ₹5.4 lakh crore.

“Amidst the volatile environment, the LIC IPO valuation review demonstrates the government’s eagerness to deliver on the IPO,” said Shivam Bajaj, founder of Avener Capital. “The revised IPO valuation may potentially unlock an investor-friendly opportunity toward wealth creation.”

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