Will Retail Investors Risk Losses From LIC IPO, Key Highlights:
LIC has priced its public offer, India's largest-ever, at the top of the indicated range (Rs 902-949), at Rs 949, based on the allotment news. But the premium for LIC shares in the grey market has fallen nearly 70 per cent since the IPO opened for subscription on May 9, underscoring sentiment that the risks are tilted toward lower listing on stock exchanges.
Indeed, LIC shares were trading at a discount of around Rs 30 in the grey market from the upper end of the price band, a sharp decline from a premium of 100 rupees earlier this month.
Financial markets have been whiplashed on stagflation worries as major central banks are poised on an aggressive interest rate hike path to combat multi-decade high inflation.
Emerging markets assets have taken a beating on foreign capital exodus driven by the dollar's appeal on a general increase in flight-to-safety trades.
Indian bourses extended their losses for six straight sessions on Friday after falling over 2 per cent in April. The Indian rupee hit new record lows repeatedly last week and breached previous life lows several times. The rupee closed at an all-time low of 77.50 per dollar on Thursday.
Despite wild gyrations in global financial markets, LIC's IPO got an overwhelming response. The offer was oversubscribed nearly three times, led by policyholders who bid for over six times the shares on offer.
But general expectations point to a lower price listing of LIC shares on Indian bourses on May 17 on global cues. While there has been criticism from several quarters on the timing of the LIC IPO, the government has raised Rs 21,000 crore by offering 3.5 per cent of its stake in the insurance company, about a third of its original target plan.
"Despite gloomy markets sentiments LIC Offer successfully managed to sail out with better than expected subscriptions figures led by strong demand from retail policyholders, retail investors and employees of the insurer. Unofficial grey premium is trading down into negative territory mainly on the back of depressed global markets which are in the bearish zone since Russia – Ukraine war," said Prashanth Tapse, Vice President for Research, Mehta Equities.
"Selling pressure continued in domestic markets wherein FII's have remained net seller's FY Until Date FII sold worth -70k Cr. Considering all the parameters, we expect soft listing between +or- 5% of the offer price. Moreover LIC offer was never been considered as listing gain candidate rather it should be looked at only long term," he added.
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