All eyes are set on the Life Insurance Corporation of India (LIC) listing on Tuesday. LIC shares will be listed on both the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE) at 10 a.m. on May 17. The insurer behemoth’s initial public offering (IPO) received a stellar response from investors when it opened for subscription. The LIC IPO was booked 2.95 times over the 16.20 crore shares that were on offer during the subscription period. Considering current market trends and low demand in the grey market, market observers predict a muted debut for LIC shares on Tuesday.
LIC IPO opened for subscription from May 4–9. The price band was fixed at Rs 902-949 per share. There was a discount of Rs 45 per equity share for LIC employees and retail investors. LIC policyholders were eligible for a discount of Rs 60 per share. The LIC IPO was entirely an offer-for-sale (OFS) where the central government aimed to offload 3.5 per cent of its stake in the life insurer.
LIC Listing Today: What to Expect?
The LIC IPO listing comes at a time when stock markets across the world are extremely volatile. The grey market premium of LIC IPO has been hovering in the negative territory for the last couple of days due to weak global markets in the aftermath of Russia’s invasion of Ukraine in February. At last hearing, the unlisted share of LIC was trading at a discount of Rs 12 in the grey market, according to IPO Watch.
"Unofficial grey premium was trading down into negative territory, mainly on the back of depressed global markets, which have been in the bearish zone since the Russia-Ukraine war. Selling pressure continued in domestic markets wherein foreign institutional investors (FIIs) have remained net sellers. Considering all the parameters, we expect a soft listing between 5 per cent discount and a premium of the offer price, "said Prashanth Tapse, VP (research), Mehta Equities Ltd.
"While the grey market premium of the LIC IPO suggests that there could be a negative listing, a probability of at par or slightly premium listing cannot be ruled out," said Vinit Bolinjkar, head of research, Ventura Securities Ltd. He added that as per current GMP, LIC shares can list at a discount of 25 rs to the issue price.
LIC IPO Valuer
On LIC IPO valuation, Yash Gupta, Equity Research Analyst, Angel One Ltd said, "At the upper end of the price band, the LIC IPO is priced at a P/EV (embedded value) of 1.1x, which is at a significant discount to other listed private life insurance companies like HDFC Life, ICICI Pru Life, and SBI Life." While LIC valuations appear to be cheap as compared to listed private players, investors need to keep in mind that LIC has a lower value to new business (VNB) margin of 9.3 per cent in 9MFY2021 as compared to private players who have VNB margins of 25-27 per cent."
LIC Listing: What Should Investors Do?
"Given the market sentiments still alarming and volatile following the global headlines, LIC may also trade in muted mood hence we advise allotted investors not to panic and hold it for medium to long term. Those who are planning to buy on a listing day should accumulate by taking volatility as opportunity," Tapse mentioned. "LIC is being offered at reasonable valuations and hence investors can hold on to the stock for long term gains," Vinit Bolinjkar added.