Life Insurance Corp (LIC) shares’ grey market premium (GMP) turned negative on Wednesday, ahead of its May 17 listing.
According to a trader who did not want to be identified, the LIC GMP peaked at Rs 93-95 per share and then began to decline. On May 5, it was trading between Rs 8 and Rs 10 per share. It was extremely volatile on May 6 and 10, with a downward trend, he said. He added that it had fallen from Rs 8-9 per share to a negative Rs 15 per share on Wednesday.
The GMP has steadily declined since its peak, owing to concerns about a lacklustre response from foreign investors. Retail and domestic institutional investors were the primary buyers of the IPO. The presence of foreign investors was minimal.
Investors were also concerned by volatility, which was sparked by fears of global central banks tightening in response to higher inflation.
While the lower valuation in comparison to peers is a positive, analysts are concerned about accumulated losses of Rs 6,028 crore, loss of market share, a lack of digital presence, and the perception that not all decisions made by the country’s largest life insurer are in line with shareholder interests.
By selling 3.5 percent of its stake in the country’s largest insurer, the government will raise Rs 20,500 crore. The stock offering began on May 4 and ended on May 9. On May 12, allotments will take place, and shares will be credited to demat accounts on May 16.
The price band had previously been set at Rs 902-949 per share by LIC, which had slashed around 60% of its issue size due to poor market conditions.
The initial public offering (IPO) was a pure offer to sell up to 221.37 million shares. For the anchor investor portion, the company set aside 59.29 million shares. The reservation portion for employees is 1.58 million, while the reservation portion for policyholders is 22.14 million. The QIB portion has a value of 98.83 million.
“The IPO was reasonably priced.” However, investors’ moods were disturbed by volatile market sentiments. If market sentiments had remained stable, we would have seen much higher subscription across all investor categories,” said Manan Doshi, co-founder of UnlistedArena.com.
“Despite the attractive offer, the volatile market environment, low subscription, and bulky issue size are the factors generating pessimism,” he said.
Meanwhile, GMP of Delhivery Ltd, Venus Pipes & Tubes Ltd, and Prudent Corp Advisory Services Ltd were trading at Rs 8-9 a share, Rs 40-42 a share, and Rs 34-36 a share, respectively.
