LIC’s grey market premium turns negative

From a peak of Rs 95 a share, it has fallen to negative Rs 15 apiece. Lukewarm response from foreign investors is the prime reason. The IPO was subscribed mostly by retail and domestic institutional buyers.

The grey market premium (GMP) of Life Insurance Corp (LIC) shares on Wednesday turned negative ahead of its listing on May 17.

A trader who did not wish to be named, said at the peak, the LIC GMP was at Rs 93-95 a share and then it started going downhill. It was trading between Rs 8 and Rs 10 a share on May 5. On May 6 and 10, it was very volatile, with a downward trend, he said. From Rs 8-9 a share, it fell to negative Rs 15 a share on Wednesday, he added.

The GMP has fallen steadily from its peak amidst worries of lukewarm response from foreign investors. The IPO was subscribed mostly by retail and domestic institutional buyers. Foreign investor participation was muted.

Volatility, sparked by fears of a tightening by global central banks following higher inflation, also worried investors.

While lower valuation, compared to peers, is positive, accumulated losses of Rs 6,028 crore, losing market share, weak digital presence and the perception that not all decisions taken by the largest life insurer in the country are not in sync with shareholder interests are worrying some analysts.

The government will be raising Rs 20,500 crore by selling 3.5 per cent of its stake in the country’s largest insurer. The share sale opened on May 4 and closed on May 9. Allotments will be done on May 12 and shares will be credited to the demat accounts on May 16.

LIC, which slashed around 60 percent of its issue size due to poor market conditions, had earlier fixed the price band at Rs 902-949 a share.

The IPO was a pure offer for sale of up to 221.37 million shares. The firm reserved around 59.29 million shares for the anchor investor portion. Employee reservation portion is at 1.58 million, while policyholder reservation is at 22.14 million. The QIB portion is set at 98.83 million.

“The IPO was priced quite reasonably. However, volatile market sentiments disturbed the mood of investors. We would have seen much higher subscription across all investor categories, if market sentiments remained stable,” said Manan Doshi co-founder, UnlistedArena.com.

“The volatile market environment, low subscription, and bulky issue size are the factors generating pessimism, despite the offer being attractive,” he said.

Meanwhile, GMP of Delhivery Ltd was trading at Rs 8-9 a share, Venus Pipes & Tubes Ltd Rs40-42 a share, Prudent Corp Advisory Services  Ltd Rs 34-36 a share.

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