New Delhi: Monday was the last day of the IPO of the state-owned life insurance company LIC. This mega issue has been subscribed almost three times. The secured quota for policyholders has received the highest subscription while the employee quota has also received a better response. However, there has been a decline in its gray market premium (GMP).
Through this IPO, the government is raising Rs 21,000 crore by selling its 3.5 percent stake. Its price band was fixed at Rs 902-949 per share. The issue was open for general investors on May 4 and for anchor investors on May 2. LIC has raised Rs 5,627 crore from anchor investors.
Policyholders’ quota filled the most
LIC’s issue filled 2.94 times till the last day. It can be considered good in terms of its huge size. The quota of policyholders and employees got a better response. About 6 times subscription has been received in the quota of policyholders. Whereas the quota of employees is filled about 4.32 times. The share of Qualified Institutional Buyers (QIBs) is 2.83 times, that of Non-Institutional Investors is 2.88 times and that of Retail Investors is 1.95 times. The final subscription figure is likely to change.
Continued fall in GMP
However, if we look at the gray market premium, then there are weak signals regarding its listing. According to experts, its premium has come down to Rs 40 in the gray market. It has decreased by almost 60 percent since the first day of the IPO. Its GMP had reached Rs 105 on the first day of the issue. Whereas before the issue opened, the GMP of LIC went up to Rs 85. On the basis of Monday’s GMP, LIC’s share can be listed at an increase of Rs 40 from the upper level of the price band of Rs 949 i.e. Rs 989. This is about 4 percent more than the issue price.
LIC shares will be listed on BSE and NSE on May 17. The allotment of its shares will take place on May 12. If the volatility in the market continues even further, then it may have an impact on its listing. This will dishearten the investors who have bid in this issue for listing gains.
What is the meaning of GMP
GMP is not an official figure. It is based on speculations about how much support an issue is going to get. It also has nothing to do with the financial position of the company. Therefore, market experts recommend reviewing the balance sheet and financial position of the company more than the GMP before investing in an IPO.
