LIC IPO: Mega Listing Benefits for Investors? Know what is GMP

LIC IPO opens on 4th May and closes on 9th May. The price band has been fixed at Rs 902 to Rs 949 with a discount of Rs 60 for policyholders and Rs 45 for employees. Market observers said LIC IPO GMP (Grey Market Premium) today stands at Rs 45, which is above its gray market premium on Thursday.

Premium on shares of Life Insurance Corporation of India (LIC) climbed 80 per cent in the gray market on April 28, as the company’s initial public offering – the biggest in the country – is set to open next week. LIC shares on the higher end of the price band set for the IPO gained a premium of Rs 45 compared to Rs 25 on April 27, according to IPOWatch, which tracks the unofficial prices of the upcoming IPO, known as gray market prices. Also known in Experts expect the gray market premium to arrive closer to the launch date.

Since LIC IPO GMP today is Rs 45, it means gray market is expecting LIC IPO listing to be around Rs 994, LIC IPO price band from Rs 902 to Rs 949 per equity share is almost 4 per cent higher.

However, stock market experts said GMP is not the right criterion to ascertain whether an IPO will outperform or not. He said that the financial position of the company gives concrete information about the fundamentals of the company. He advised investors to go through the balance sheet of LIC instead of just following GMP.

Unlisted Arena co-founder Abhay Doshi said early signs are healthy but the problem is huge and the company is gaining a decent amount of weight in the informal market.

Doshi, who is fond of gray market, said, “Grey market should not be given much attention for LIC’s IPO as the issue is huge. “Let the issue be open and watch the investor interest in the issue. It is too early to say anything now.”

On whether one should apply for LIC IPO or not, Santosh Meena, Head of Research, Swastika Investmart Ltd said, “LIC is the largest insurance provider in India. During the inception of the IPO, the valuation was pegged at Rs. 12 to 13. lakh crore, but due to global economic factors and increasing volatility, the government has lowered the valuation to around Rs.6 lakh crore.

The embedded value of LIC, which is a measure of the value of a consolidated shareholder in an insurance company, as of September 30, 2021, is around 5.4 lakh crore. Therefore, at a valuation of Rs.6 lakh crore, the issue is priced at an Embedded Value of 1.1, which is a discount compared to its listed Indian as well as global peers.”

“LIC is synonymous with insurance in India and enjoys a huge competitive advantage in terms of brand value and a vast network of agents.

However, there are concerns with the company such as losing market share to private players, lower profitability and revenue growth than private players, low VNB margins, and short-term persistence ratio, but valuations at an embedded value of 1.1 discount to the above concerns. Nevertheless, investors should be aware that the business of insurance is long-term in nature; That’s why we recommend this issue only for the long term.”