LIC IPO might list at a discounted price; Here’s analysts view on whether to sell or hold LIC ipo post listing

• The grey market premium of LIC IPO has come down sharply to a discount of ₹10 from ₹90 a few weeks back.
• This indicates that the shares of the company might make a weak listing debuting below its higher price band of ₹949 per share.
• Weak demand from foreign investors and volatile market environment has pulled down the enthusiasm around the IPO.

The largest IPO in the history of the Indian stock market, state-owned Life Insurance Corporation of India (LIC) is facing the headwinds from a weak market sentiment - which has already kept foreign investors at bay.

Though the issue was subscribed 2.95 times, it is yet to face another acid test as its lists on the bourses on May 17, 2022.

Grey market indicates no listing gains for LIC investors

Anticipating waning enthusiasm of investors after the Russia-Ukraine war, the Navaratna company has already cut its issue size. But that too could not save it from the Indian central bank’s surprise rate hike and many more global cues which weakened the equity markets.

The grey market too has lost its enthusiasm for the stock. This is the unofficial market where individuals buy or sell IPO shares or applications before they are listed on the exchanges.

A few days back, it was trading at a premium in the gray market since many analysts believed that the issue was well-priced. But today, it slipped to a discount of ₹10 from the higher end of the price band of ₹949. So those lucky few who had been allotted shares and hoping to make a listing profit, must now forget about it.

This is mostly due to a fall in benchmark indices which are nervous of inflation data and rising crude oil prices. Sensex and Nifty 50 have tumbled nearly 10% in the last month mirroring losses in Asian and the US markets.

Investors are getting nervous over losing more money in a poor market condition

This IPO season has not been a good experience for the investors after listing losses of PayTM and the successive fall in stock prices of other startups. Yet, most analysts had banked their hopes on LIC due to its strong fundamentals. It however looks like markets have the last say when it comes to the success of IPOs.

“LIC IPO’s grey market premium (GMP) at the start of the IPO was trading at ₹100 per share but now premium slipped to ₹10 per share as we continue to see selling pressure in the broader markets,” said Yash Gupta, equity research analyst at Angel One.

Gupta however believes that despite slips in the GMP, retail investors have a good chance to earn from this IPO as they get a discount of ₹45 per share.

The IPO is entirely an offer for sale by the government to raise ₹21,000 crore by selling 22.13 crore shares in the company. Its price band was fixed at ₹902-₹949.

Life Insurance corporation of India (LIC) is the largest insurance player in India and has a market share of more than 60% in total premiums. However, it has been losing market share gradually over the years to small and new players.

Most analysts believe LIC is valued significantly lower than other listed private players despite being a dominant player.


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