Mumbai : Another PSU insurer IPO is opening to mobilize Rs. 9600 crore from the market and the issue is priced at Rs.770-800 per share for Rs. 5 FV share on Wednesday. Yes, we are talking about The New India Assurance Co. Ltd. (NIA), a giant in general insurance segment and the oldest one on the verge of completing century by next year. So far we have seen IPOs from ICICI Lombard General Insurance Co.Ltd. that offered shares at a price of Rs. 661 (for Rs. 10 FV) and garnered Rs. 5700 crore. This company leads private sector players in General Insurance Segment. Although we have also seen an IPO from General Insurance Corp. (GIC Re), which is having a specialized re-insurance business in general insurance sector and hence is not to be compared with this IPO on business parameters.
However, on pricing aspects, yes GIC Re came with an offer in the price range of Rs. 855-912 and finally allotted shares at Rs. 912 and mobilized Rs. 11373 crore. This company offered a discount of Rs. 45 per share to retail investors and employees, but failed to attract one time subscription. What is more, HNI quota remained heavily undersubscribed as the IPO did not commanded any grey market premium but on the contrary there were reports of sellers at discount to offer price.
In case of NIA it is offering upfront discount of Rs. 30, but till this day, it did not find any grey market movement and there were only sellers at a discount with no buyers, as per market sources. While it is not comparable with GIC Re on segment basis, but on IPO pricing it looks fully priced discounting immediate future growth.
According to market sources this issue too likely to be bailed out by LIC, PSU Banks etc and few QIBs as well as MFs, who are having surplus funds. This appears to be reality as on Day one, NIA IPO got 1.04 times subscription and is thus got oversubscribed, but if we see the tally, QIBs is 2.13 times, HNIs 0.02 times, Retail 0.02 times and Employees 0.03 times. Most of analysts are having neutral to negative bias for this IPO and almost all are endorsing the view that this IPO is only for long term investors as in short term no gains likely.
First day report card
According to market sources this issue too likely to be bailed out by LIC, PSU Banks etc and few QIBs as well as MFs, who are having surplus funds. This appears to be reality as on day one, NIA IPO got 1.04 times subscription and is thus got oversubscribed, but if we see the tally, QIBs is 2.13 times, HNIs 0.02 times, and Retail 0.02 times.
