Understanding the LIC IPO: Price, Valuation, and Market Expectations
Life Insurance Corporation of India (LIC), the largest insurance company in India, recently conducted its Initial Public Offering (IPO). This article aims to provide comprehensive insights into the possible IPO price range, the allotment process, and the current market expectations for the listing price.
The Possible IPO Price Range
There is a widespread speculation around the potential IPO price range for LIC. Various financial analysts predict that the IPO price could range between Rs 1500 and Rs 3200 per share. However, a more specific range based on expert opinions suggests that the issue price could range between Rs 2000 and Rs 2100 per share. This expectation is closely linked to the market demand and supply dynamics.
Market Listing Details
On Tuesday, LIC listed its shares on the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE) at a discount of over 8 per cent. Each share listed at Rs 867.20, significantly lower than the mega initial public offering (IPO) allotment price of Rs 949 per share. The listing price is determined based on the market demand and supply, aiming to balance this for the benefit of all investors.
The allotment price of the IPO is set through a process known as book building. The range for book building is between Rs 902 and Rs 949 per share. As the IPO is expected to be oversubscribed, applicants are advised to apply for multiple lots if possible. A lot consists of 15 shares, so interested investors can apply with Rs 14325, and if they are a LIC policy holder, they can apply for one lot with Rs 13335 through ASBA (Application Specific Bank Account) in their savings account.
Valuation and Trends
LIC's embedded value as of September 30, 2021, has been estimated at 5.39 lakh crore. Historically, private insurance companies trade at a multiple of 3-4 times embedded value. Considering the size and dominant market share of 66 per cent in new business premium, the corporation's valuation can range from Rs 10.7 lakh crore to Rs 18.7 lakh crore, based on a multiple of 2-3.5.
The issue size for a 5% offer for sale works out to Rs 53500 crore to Rs 93625 crore, given the total equity capital of 632 crore shares. These valuations are indicative and can fluctuate based on various qualitative factors and the prevailing market conditions.
Market Outlook
Despite the expectations of a listing price lower than the allotment price, the current grey market premium for LIC suggests a possible RED (Red) listing. This means the market may not support the discounted price at the IPO, and the shares might trade lower than the IPO price on the BSE and NSE.
Given the oversubscription and the anticipated market demand, it is crucial for investors to understand the IPO price range, the allotment process, and the potential impact of market conditions on the final listing price. For detailed information, it is recommended to reach out to financial advisory services like Goodwill Wealth Management.
[Goodwill Wealth Management]