LIC shares to list tomorrow, may have a soft debut. What should investors do?
Premium- LIC shares: Analysts suggest that investors who had got allotment of shares in LIC IPO stay put for the long term.
The shares of LIC could have a flat listing tomorrow, based on the current market situation, according to Aayush Agrawal, Senior Analyst, Swastika Investmart. The country's largest insurer will list itself on the BSE and NSE on May 17. The government has fixed the issue price of LIC shares at ₹949 apiece, the upper end of the IPO price band, following the initial share sale offer which was oversubscribed nearly three times the issue size.
The retail investors and eligible employees of LIC were offered a discount of ₹45 per equity share over the issue price, while policyholders got a discount of ₹60 per share. LIC policyholders and retail investors have got the shares at a price of ₹889 and ₹904 a piece, respectively.
“According to recent grey market patterns, the company's unlisted shares were selling at ₹936 per share on Saturday (May 16), a discount of ₹13 to the IPO price band's upper range. However, the stock's modest float may limit the stock's post-listing decline," he said.
Due to inflation concerns, FII outflows, currency weakness, Ukraine-Russia and rate hike-related worries, global equity markets, including India, are experiencing extraordinary volatility, causing sell-offs.
“Despite gloomy markets sentiments LIC Offer successfully managed to sail out with better than expected subscriptions figures led by strong demand from retail policyholders, retail investors and employees of the insurer. Unofficial grey premium is trading down into negative territory mainly on the back of depressed global markets which are in the bearish zone since Russia – Ukraine war. Selling pressure continued in domestic markets wherein FII’s have remained net seller’s FY Till Date FII sold worth -70k Cr. Considering all the parameters, we expect soft listing between +or- 5% of the offer price," said Prashanth Tapse, Vice President (Research), Mehta Equities Ltd .
Swastika Investmart suggests that investors who had got allotment of shares in LIC IPO stay put for the long term, even if “the company lists at a discount."
“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," Agrawal said.
Tapse, Vice President (Research), Mehta Equities, says "we advise allotted LIC investors not to panic and hold it for medium to long term. Those who are planning to buy on a listing day should accumulate by taking volatility as opportunity".
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The IPO of LIC - the biggest so far in India - had closed on May 9 and shares were allocated to bidders on May 12. The government sold over 22.13 crore shares or 3.5 per cent stake in LIC through the IPO at a price band of ₹902-949 a share. The share sale fetched the government around ₹20,557 crore.
LIC had last month reduced its IPO size to 3.5 per cent from 5 per cent decided earlier due to the prevailing choppy market conditions. (With Agency Inputs)