India's mega IPO, Life Insurance Corporation of India (LIC) shares will be listed on both the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE) at 10 AM today (May 17).
The initial public offering (IPO) received a sound response from investors when it had opened for subscription.
LIC IPO was booked 2.95 times over the 16.20 crore shares that were on offer during the subscription period.
The listing comes at a time when the stock markets are volatile amid accelerating inflation and rising interest rates.
The government has fixed the issue price of LIC shares at Rs 949 apiece, the upper end of the IPO price band, fetching the exchequer around Rs 20,557 crore.
According to recent grey market patterns, the LIC`s unlisted shares were selling at Rs 936 per share on Saturday, a discount of Rs 13 to the IPO price band`s upper range. However, the stock's modest float may limit the stock's post-listing decline.
However, as per Monday's (May 16) GMP position, the LIC shares are selling at a discount of Rs 19.
Aayush Agrawal, Senior Analyst, Swastika Investmart Ltd. on LIC IPO., said, "We anticipate that LIC might have a flat listing tomorrow (May 17) , based on the current market situation. Due to increased inflation statistics, FII outflows, currency weakness, geopolitical and rate hike-related worries, present markets are experiencing extraordinary volatility, this has caused sell-offs in equity markets all over the world."
"Even if the shares list flat on Tuesday, retail investors will still be able to make gains due to the discount that was offered so I don`t see it as a bad bet as valuations are also attractive," Narendra Solanki, fundamental research head at domestic brokerage Anand Rathi, told Reuters.
Yash Gupta- Equity Research Analyst, Angel One Ltd, said, "Retail investors who have to receive the allotment can hold list for short term to medium term, we expect LIC to do in near future as LIC will be trading at P/EV (embedded value) of 1.1x at an upper price band of Rs 949 which is at a significant discount to other listed private life insurance companies like HDFC Life, ICICI Pru Life, and SBI Life. LIC IPO initially may see some selling pressure as all the retail investors have received the allotment. Looking at the cheap valuations of LIC as compared to other listed players offers comfort and investors with a longer time horizon can hold or buy more."
Axis Securities said, the market volatility is likely to weigh on the listing day performance of LIC. "We expect LIC to debut at a discount, and it is unlikely for investors to book any listing gains. However, owing to the discount offered to the policyholders and retail investors, they could end up making a marginal gain on the listing".
LIC is synonymous with insurance in India and enjoys a huge competitive advantage in terms of brand value and huge network of agents. However, there are concerns with the company like losing market share to private players, lower profitability & revenue growth compared to private players, lower VNB margins and short-term persistency ratios, but the valuation at Price to Embedded Value of 1.1 had discounted the above concerns. Nevertheless, investors must be aware that the business of insurance is long term in nature; therefore we recommend investors to stay with the company for the long term even if the company lists at a discount.