LIC IPO debuts on Dalal Street at discounted price
What's the story
Following a much-awaited Initial Public Offering (IPO), LIC has made its debut on Dalal Street. Its shares are listed at Rs. 872 on the National Stock Exchange and Rs. 867.2 on the Bombay Stock Exchange - at a discount of Rs. 77 and Rs. 81.8, respectively, compared to its Rs. 949 issue price. The IPO of the company has raised Rs. 21,000 crore.
Context
Why does this story matter?
LIC is synonymous with insurance in India. Therefore, it is unsurprising that the company's listing on the stock market raised the kind of hype it has. The highly volatile market has curbed that excitement to a certain extent. There are several factors at play that make people worry. However, many believe that LIC's stock will be a good and secure medium to long-term investment.
IPO
The IPO was oversubscribed by nearly 3 times
Subscription for the LIC IPO began on May 4. The IPO received a good response from investors after a six-day subscription period that went on till May 9. The shares were oversubscribed by 2.95 times. The policyholder and employees portion saw 6.12 times and 4.4 times bids, respectively. The issue price was fixed at Rs. 949, with a discount of Rs. 60 for policyholders.
Mood
War and rising interest rates have made the market volatile
The discounted price at which LIC shares debuted does not come as a surprise to many. The fallout from the Russian invasion of Ukraine, the high interest rates, and supply-chain disruptions have made the market highly volatile. Considering the foreign investment outflow and accelerating inflation, the unstable market will cause a problem for small-time investors like the majority of LIC stock purchasers.
Disinvestment
Government has disinvestment target of Rs. 65,000 crore this year
The LIC IPO is a big part of the government's plan to raise funds through disinvestment. Although the sale of the company's shares was mooted for the longest, the pandemic and unfavorable market made the government wait. The government targets Rs. 65,000 crore in disinvestment this year and nearly a third of the target has been achieved from LIC's Rs. 21,000 crore IPO.