LIC's Grey Market Premium falls short of Rs 90 on IPO

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LIC's Grey Market Premium falls short of Rs 90 on IPO

The Grey Market Premium of Life Insurance Corporation of India LIC came in to negative on Wednesday despite an overwhelming response from investors in the primary market. Shares of the insurance behemoth are likely to list on the bourses on May 17.

The initial public offering IPO of the insurer was subscribed nearly 3 times on the final day of the offer on May 9, led by the strong response from policyholders, employees and retail investors. The price band was set to be Rs 902 -- 949 per share. Retail investors and employees of LIC were offered a special discount of 45 per share. There was a discount of 60 rupees for policyholders.

According to a market watcher who deals in unlisted shares, LIC is close to a discount of 20 percent in the unlisted market. The GMP of the insurance giant was hovering around Rs 90 on April 30. Grey market premium is a premium amount at which grey market IPO shares are traded before they are listed on the stock exchange.

Abhay Doshi, founder of UnlistedArena, said that LIC IPO shares are available at a discount of 20 in the unlisted market. The IPO pricing was kept at reasonable valuations. The market conditions were troubled by the dicey market conditions. The IPO, volatility in the broader market and interest rates hike have been mood spoilers for the primary market. If market conditions were stable, we would have seen a decent response to the IPO of financial behemoth, Doshi said.

A majority of brokerages gave KR Choksey Shares and Securities said that LIC should focus on its strong growth momentum by gaining market share and focusing on underwriting quality and high margin product mix. The company's valuation will be at par with its private peers due to the growth prospects for the pension and annuity segment and the company's position as the market leader in the insurance sector. LIC's embedded value with market cap of Rs 6,00, 200 crore is quite low compared to the three listed peers like HDFC Life Insurance, SBI Life Insurance and ICICI Prudential Life Insurance, where the average embedded value was at Rs 3,10, 500 crore and the average market cap was 3.4 times, according to Anand Rathi Share and Stock Brokers. The issue looks attractive to investors.