The initial public offering of the Life Insurance Corporation of India has commanded a 9 percent premium over its upper price band in the grey market as the Rs 21,000-crore issue opens for subscription on May 4.
In fact, the traded grey market premium has increased from 5 percent, quoted last week.
As per the data by IPO Watch and IPO Wala, LIC traded at a premium of Rs 85 per share in the grey market on Wednesday, against Rs 45 premium last Thursday.
This translated into an expected listing premium for LIC around 10 percent over the upper price band. The price band for the offer is Rs 902-949 per share.
Employees and retail investors will get shares at a discount of Rs 45 a piece to the final offer price, while the discount for policyholders is Rs 60 per share to the final IPO price.
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The grey market is an unofficial platform, which generally tracks for expected listing price of the company. The trading in grey market starts with the announcement of price band or IPO opening date, and continues till the listing of shares on the bourses.
LIC launched a public issue of 221.37 million equity shares on Wednesday, representing a 3.5 percent stake, which is entirely an offer for sale by the government.
The company already mopped up more than Rs 5,000 crore through its anchor book on May 2, of which Rs 4,000 crore has been invested by 15 domestic mutual funds through 99 schemes.
All analysts advised subscribing to the offer, citing the underpenetrated life insurance market in India, attractive valuations, and expected improvements in product mix, though there is a market share loss in individual insurance businesses and historically lower margins.
Also read - LIC IPO opens: Should you subscribe to the issue?
"At the upper price band, the stock is priced at 1.1x of its Q2FY22 Indian Embedded value (market capitalization/embedded value: Rs 6 trillion/Rs 5.39 trillion), which is at a significant discount to its listed peers. Currently listed insurance companies trade at Market capitalisation/EV multiple of around 2.8x. LIC has a marquee anchor list of investors," said LKP Research which recommended subscribing the LIC IPO.
India's life insurance industry is expected to grow rapidly, owing to a relatively underpenetrated market and expanding awareness, which presents a multi-year growth opportunity.
LIC has been providing life insurance in India for over 65 years and is the country’s biggest life insurer, with a significant brand value advantage.
Also read - LIC public issue will be a good buy for investors, says Manish Sonthalia of Motilal Oswal AMC
"There are concerns about losing market share to private players and having lower profitability and revenue growth when compared to private players. However, we believe that LIC’s distribution advantage, increasing sales mix of direct and corporate channels, and a gradual shift to high margin Non- participating products could be possible drivers for LIC’s future growth, negating lower than industry growth rates," said LKP.
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