Ahead of LIC listing, grey market premium vanishes

Mumbai: The unofficial trades in the grey market for

LIC

shares ahead of its

listing

on Tuesday have gone into a

discount

to the final offer price of Rs 949 per share. This indicates some listing-day gains for policyholders and retail holders but marginal losses for others. However, market sources said that local institutions may step in to support LIC’s stock price for the first few days.

Late on Monday evening, the

grey market premium

(

GMP

) for the LIC stock was at a discount of between Rs 15 and Rs 20 per share, indicating that the scrip could list at around Rs 935. At this price, the policyholders — who got the shares at Rs 889 after a discount of Rs 60 — will still see a profit of about Rs 45. And retail shareholders — who got the shares at Rs 902 after a discount of Rs 45 — will see a profit of Rs 30. Other shareholders, however, will not see a profit as they had got the allotment at Rs 949.

History also is skewed against LIC, which completed the country’s largest IPO. In four of the five largest IPOs in India, the stocks closed at a discount after their market debut. The only exception is that of Coal India in 2010. Its Rs 15,200-crore IPO was subscribed over 15 times and the stock was listed at a 17.5% premium and closed its first day of trading with a 40% gain.

Other than that, stocks closed the listing day at a discount to the offer price in the IPOs of One97 Communication (Paytm, the second-largest one), Reliance Power (the fourth-largest), General Insurance Co (the fifth-largest) and SBI Cards & Payment Services (the sixth-largest). On Tuesday, LIC needs strong investor support to close in the money, market players said.

On May 9, LIC closed its Rs 21,000-crore IPO with a subscription figure of nearly three times. Its policyholders and retail shareholders led the subscription figures, along with some strong support from local institutions. Through the offer, the government sold 3.5% of its stake in the life insurance giant.

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