Shares of Life Insurance Corporation of India (LIC) are commanding a premium of ₹45 in the grey market, days before the insurer’s initial public offering (IPO) opens.
The insurance major saw its grey market premium (GMP) rise 80% on April 28, a day after the IPO was announced. The GMP for LIC shares was at ₹25 on April 27, according to IPOWatch, a portal that tracks prices of upcoming IPOs. By the end of last week, it was around ₹15.
The grey market premium of an IPO is indicative of the price at which the company’s shares will list. With the GMP for LIC shares likely to rise as the IPO draws closer, its shares might list at a premium of 5% or more, above ₹1,000.
The highly anticipated initial public offering (IPO) of Life Insurance Corporation of India was announced on Wednesday. The anchor portion of the IPO will open on May 2. The bidding for other categories will begin from May 4 and go on till May 9. The basis of allotment will be finalised with the designated stock exchange around May 12, followed by initiation of refunds around May 13. Equity shares will be credited into demat accounts of allottees by May 16. The shares will be listed on stock exchanges around May 17.
The central government is looking to raise around ₹21,000 crore from the LIC IPO by diluting its 3.5% stake in the insurance major. The issue size has been revised from 5% considering the market conditions and lack of interest among investors towards IPOs. The insurer is eyeing a valuation of close to ₹6 lakh crore on the upper band of the IPO price range through this issue.
Despite the revised issue size, the LIC IPO is set to be the largest initial public issue ever seen in India, surpassing the likes of Paytm (₹18,000 crore) last year, Coal India (₹15,500 crore) in 2010, and Reliance Power (₹11,700 crore) in 2008.
The central government will offload 221,374,920 equity shares, representing 3.5% of the post-offer paid-up equity share capital, in this issue. Of this, 1,581,249 shares, or 0.025% of the post-offer equity share capital, have been reserved for employees; 22,137,492 shares, or 10% of the issue, have been reserved for the eligible policyholders; and 69,179,663 shares, or 35% of the net offer, have been reserved for retail investors. Half of the issue has been reserved for qualified institutional bidders (QIBs), including anchor investors, mutual funds and others.
LIC is planning to raise ₹2,100 crore from policyholders and ₹150 crore from employees reservation portions. A total of ₹3,751 crore will be raised from the net QIB portion, including mutual funds and other QIBs. The company will raise ₹2,813 crore from the non-institutional portion, and ₹6,565 crore from the retail portion.
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