Missed SBI Life IPO? Buy it now for long-term gains: 5 reasons to bet on it

By: | Published: October 3, 2017 2:06 PM

Did you miss to subscribe for shares of the largest public offer in last seven years -- SBI Life Insurance -- if yes, then you might need not worry, as you can buy it in the open market for long-term gains.

The huge initial public offer (IPO) was subscribed 3.58 times between 20 September and 22 September. (Image: Reuters)

Did you miss to subscribe for shares of the largest public offer in last seven years — SBI Life Insurance — if yes, then you might need not worry, as you can buy it in the open market for long-term gains. Shares of SBI Life Insurance made a decent debut on stock exchanges on Tuesday after the insurer recently completed its Rs 8,400 crore IPO in September. The stock of SBI Life Insurance advanced 5% on the listing from its issue price of Rs 700 to the day’s high of Rs 735 on NSE. The huge initial public offer (IPO) was subscribed 3.58 times between 20 September and 22 September.

Here are the five key things on which you can bet on:

Biggest IPO after Coal India

SBI Life Insurance was the second in the category of a life insurance business to list on exchanges after ICICI Prudential Life Insurance, which went public last year. The company raised about Rs 8,400 crore at the upper hand of the price band. SBI Life’s Rs 8,400 crore IPO was the largest public offer in last seven years and the biggest after Coal India’s Rs 15,200 crore share sale.

Solid promoters

SBI Life Insurance has got an umbrella of who’s who of the financial services business — State Bank of India — largest bank of India and another backing from BNP Paribas Group company, BNP Paribas Cardiff. Through the offer for sale route, SBI has diluted up to 8 crore shares while BNP Paribas Cardif SA sold up to 4 crore shares. SBI Life Insurance is a JV between State Bank of India (70%), and BNP Paribas Cardiff (26%).

Track the live updates on stock movement: SBI Life Insurance Company

Experts take

The insurer’s new business premium grew 35% from FY15 to FY17; it has a leadership position with 20% market share in new business premium in FY17. “We believe the Indian Life Insurance industry is in a phase of high growth and lower penetration will ensure the growth remaining higher for next couple of years. SBI Life with its strong brand name and wide distribution network is one of the best plays for Indian Life Insurance industry,” said Jaikishan Parmar, Research Analyst, Angel Broking. “One can hold up for a minimum of one year to have decent gains out of SBI Life Insurance. The quarter to quarter performance and efficiency of margins will ride the stock of SBI Life,” said Jaikishan Parmar. The premium valuation for SBI Life is fairly justified due to its higher incremental market share gain and hence it is a ‘buy & hold’ with a long-term perspective, Jaikishan Parmar added.

Financials and asset size

SBI Life Insurance reported a rise of 13% in the net profit to Rs 954.65 crore for the financial year ended 31 March 2017 as compared to Rs 844.1 crore for the financial year 2015-2016. As on 31 March 2017, the total assets of the company stood at Rs 2,678.29 crore, up 15.9% from last year’s Rs 2,311.06 crore.

Good response from Anchor Investors

SBI Life Insurance raised Rs 2,226 crore from anchor investors. The list of anchor investors includes BlackRock, Canada Pension Fund, Government of Singapore, Abu Dhabi Investment Authority, HSBC, HDFC MF, ICICI Prudential MF, Kotak MF, Reliance MF, Axis MF and UTI MF are among the 69 anchor investors.

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