LIC IPO GMP: With the company’s largest-ever IPO scheduled to begin next week, the premium on shares of Life Insurance Corporation of India (LIC) in the grey market increased by 80% on April 28. According to IPOWatch, which follows grey market pricing, or unofficial prices of prospective IPOs, LIC shares demanded a premium of Rs 45 above the higher end of the price band announced for the IPO, up from Rs 25 on April 27. Experts anticipate a little increase in the grey market premium as launch day approaches.
Open to the public on May 4, the LIC IPO finishes on May 9. With a reduction of Rs 60 for policyholders and Rs 45 for employees, the pricing range has been fixed at Rs 902 to Rs 949. Market watchers reported that the LIC IPO’s GMP (grey market premium), which was Thursday’s grey market premium, is now Rs 45.
The grey market is anticipating a LIC IPO listing price of roughly Rs 994, which is around 4% higher than the LIC IPO pricing band of Rs 902 to Rs 949 per equity share, while the LIC IPO GMP today is Rs 45.
GMP is not the appropriate criterion, according to stock market professionals, for determining whether or not an IPO will perform well. They said that the company’s financials provide specific details on the company’s fundamentals. They recommended investors consider LIC’s financial sheet rather than adhering to GMP alone.
The company is commanding a respectable weight on the unofficial market, according to Abhay Doshi, co-founder of UnlistedArena, who said that while the issue is relatively substantial, the initial signs are positive.
Given the size of the offering, one shouldn’t concentrate too much on the grey market for the LIC IPO “Doshi, the ardent tracker of the grey market, remarked. “Let the issue be known so that investors can gauge their interest in it. It’s too soon to make any statements.”
Santosh Meena, head of research at Swastika Investment Ltd, commented on whether or not one should apply for the LIC IPO: “LIC is the largest insurance provider firm in India. The government has decided to reduce the valuation to about Rs. 6 lakh crores from the initial estimate of Rs. 12 to 13 lakh crores due to heightened volatility and the state of the global economy. The embedded value of LIC, As of September 30, 2021, the value of the consolidated shareholders in an insurance firm was around Rs. 5.4 lakh crores. Thus, the issue is priced at a discount to its listed Indian and international rivals, with a Price to Embedded Value of 1.1 at a valuation of Rs. 6 lakh crores.
“LIC enjoys a significant competitive advantage due to its strong brand value and extensive agent network. Insurance is synonymous with LIC in India. There are issues with the company, such as its short-term persistency ratios, decreased VNB margins, and loss of market share to private companies. However, the valuation at 1.1 times price to embedded value allays these issues. However, investors should be aware that the insurance industry is long-term in nature, thus we only propose this issue for the long term, according to Meena.