Mumbai : It is now more than a year and in this period, we witnessed four IPOs from insurance sector entering the capital market. Last year, ICICI Prudential (private sector insurer) broke the ice for this segment with first ever issue, that attracted investors across the class, but failed to charm post listing with quote at discount to offer price. No doubt, it is now giving some rewards to investors, but it emerged as the long term play. Having burnt the fingers in the maiden private sector issue from life insurance segment, investors turned cautious and gave lukewarm response to IPOs that came in the recent past i.e. ICICI Lombard (again a maiden issue from general insurance sector) followed by SBI Life Insurance.
However, the last mega issue of GIC Re – (re-insurance sector) among all turned out to be a big failure and raised big question mark about pricing and the valuations of such companies. While first three IPOs had a face value of Rs. 10 per share the last entrant with FV of Rs. 5 came with so called justified pricing as claimed by merchant bankers.
One can see that while ICICI group’s both IPOs have turned positive for rewards as of 27.10.17 and ICICI Prudential has shown major reverse turn from -10.78% to 18.26%, the other two IPOs have turned a loss making proposals. In fact the biggest IPO of GIC Re has become the big eraser of investor’s money. What is more, GIC Re offered a discount of Rs. 45 per share, but still neither retail investors nor employees are happy.
Following such disaster, when a question was asked to BRLMs, they gave the excuse of non understanding of accounting and the valuation part across investors’ class including themselves. Insurance sector IPOs are coming for the first time. GIC Re IPO marked negative GMP (Grey Market Premium) from day one but considering discount of around Rs. 28, retail masses went for subscription for the residual benefit emerging from the discount offered to them as with upfront discount, their investment cost was coming to Rs. 867 giving minuscule reward on the debut day. Those who could not sell are having notional loss on their investment considering LTP.
As known, GIC Re IPO got tepid response and got oversubscribed just 1.38 times with around Rs. 7500 crore investment coming from LIC of India. According to final tally, the issue got subscription of 2.25 times from QIBs, 0.22 times from HNIs, 0.63 times from Retail and 0.94 times from Employees. Thus it was missing the masses including employees.
It is said that having learnt the lesson from GIC Re disaster, Government has lowered the price band for its New India Assurance offer to Rs. 770-800 per share (on Rs. 5 FV). But GIC Re performance so far is prompting no Grey Market activities for this IPO and its success is hinging on support from QIBs and DIIs like LIC and other PSUs.
