LIC IPO: Why are experienced investors not in a hurry to put their money?

Policyholders of the Life Insurance Corporation (LIC) of India rushed to invest on the very first day of opening of the Initial Public Offering (IPO) of the life insurance behemoth, resulting in oversubscription of their quota.

However, it took three days to get the retail investors’ quota oversubscribed even after extension of primary market timings from 10 am to 7 pm on all days till the issue remains open.

At around 6.30 pm on Day 3 of the LIC IPO, the policyholders had subscribed over 3.9 times, employees around 3 times and retail investors around 1.2 times, while non institutional investors (NIIs) had subscribed only around 71 per cent of their quota and qualified institutional investors (QIB) subscribed just 55 per cent of the shares offered to them.

While a discount of Rs 60 per equity share for the policyholders and Rs 45 each for the LIC of India employees and retail investors would have motivated these investors, the lack of interest in bulk investors is a cause of concern.

Basically it’s the ultra conservative people who comprise the majority of LIC policyholders, especially those taking endowment policies – the mainstay of the LIC of India. Similarly, the majority of the employees of the Corporation would have never invested in market-linked instruments and have opened demat accounts only to invest in LIC IPO.

So, it’s mostly the amateur investors, who have rushed to invest in the IPO, while experienced retail investors – even after getting a discount – have adopted a go-slow approach. Many of the institutional investors are still sitting on the fence and are yet to participate.

So, what makes the experienced investors go slow in investing in the LIC IPO?

“Depending on the situation, it’s better to invest in many shares through secondary markets, rather than through the IPO route,” said Debashis Majumder, a Kolkata based seasoned investor.

In case of LIC IPO, Majumder points out some of the factors that have made him go slow:

Increase in Policy…

Read complete post here:
Source link