After going through a tumultuous phase of delays and more delays, the Initial Public Offering of the Life Insurance Corporation of India is finally on track for public subscription on May 04, 2022. The LIC IPO is slated to close on May 09, 2022, after staying open for about 9 days.
If you’re interested in knowing whether the share price of LIC will see any gains on the listing day, then here’s something that can help give you some much needed clarity. But before we go ahead and take a look at whether the upcoming IPO would see listing gains, let’s first take a quick look at the highlights of the IPO
Through this IPO, the government of India is looking to sell around 221.3 million shares of LIC, which forms around 3.5% of the total stake. As a result of this sale, the government is likely to net around Rs. 21,000 crores.
The IPO price band has also been set, starting from Rs. 902 and going all the way up to Rs. 949. The minimum lot size that investors would have to adhere to has also been notified at 15 shares.
Retail investors and employees of LIC get to enjoy a discount of around Rs. 45 per share from the IPO price. That’s not all. Even LIC policyholders are eligible for a discount of Rs. 60 per share from the IPO price, making it an extremely valuable opportunity for individuals holding LIC policies.
While it is still early to determine whether the LIC IPO would see any big listing gains, there’s an indicator of its performance - the Grey Market Premium (GMP). The GMP is essentially the price at which the IPO shares are traded in the grey market, which is an unofficial market. It is the price that institutional investors are willing to pay to own the shares of a company.
The Grey Market Premium has historically been used as one of the methods to determine the performance of the shares of a company upon listing. According to the GMP for LIC IPO, the shares are being traded at a premium of around Rs. 20 per share, with regards to the upper end of the price band. This means that the GMP of LIC shares are around Rs. 969.
If this keeps up until the listing day, the shares of LIC are likely to witness listing gains. However, since the GMP keeps fluctuating with every passing day, it is very difficult to determine if LIC would see any such listing gains at this point in time.
Going by the GMP, the shares of LIC are likely to open at a gain of Rs. 20 per share. That said, there have been many instances where the Grey Market Premium has failed to give an accurate prediction of the share price on listing day. Therefore, as an investor, it would be advisable for you to do your own research or reach out to a financial advisor.
Irrespective of whether LIC sees large listing gains or not, it can be considered for a long-term investment. So if you’re interested in investing in the LIC IPO, make sure to possess an active demat account. If you don’t have one already, get in touch with Motilal Oswal right away to open a demat account online within just a few minutes.