New India Assurance Rs 10,000 crore IPO oversubscribed 20% at close

By: | Updated: November 3, 2017 7:03 PM

The near Rs 10,000 crore IPO of state-owned New India Assurance was subscribed by 1.2 times at the end of Day 3.

The Rs 9,600 crore IPO of New India Assurance was subscribed by 1.2 times at the end of Day 3. (Image: Reuters)

The near Rs 10,000 crore IPO of state-owned New India Assurance was subscribed by 1.2 times at the end of Day 3.  Notably, the Rs 9,600 crore IPO was subscribed by more than 95% within four hours of opening on Day 1. As at end of Day 3, the total bids were received for 14,32,39,446 shares as against 12,00,00,000 shares. Overall, the issue was subscribed 1.2 times, data with exchanges showed. The QIB portion saw demand to the tune of 13,59,66888 shares as against their reserved quota of 5,82,00,000, implying subscription of more than 2.3 times. The retail investor portion saw muted demand and investors put in bids amounting to 12% of the portion reserved for them. Similarly, the non-institutional investors category portion also saw negligible demand, as from a total of 1,74,60,000 shares reserved for them they had bid for a total of 20,30,004 shares, implying subscription of more than 11%. The retail investors subscribed for a total of less than 45.4 lakh shares from a total of 4,07,40,000 shares reserved for them. Notably, there was also a difference in subscription seen in BSE vis-a-vis the subscription on NSE. The QIBs portion was subscribed by more than 1.72 times on NSE while the same was below 0.62 on BSE.

India’s largest general insurance company, New India Assurance (NIA) was looking to raise up to Rs 9,600 crore at upper end of the price band. New India Assurance was offering 12 crore equity shares out of which there was a fresh issue of 2.4 crore shares and remaining 9.6 crore shares was sold by the government though offer for sale. The bid lot was fixed at a minimum of 18 equity shares and in multiples of 18 equity shares thereafter. The company had offered a retail discount and an employee discount of Rs 30 per equity share on offer price. The company’s price band was Rs 770-800 per equity share of face value of Rs 5 each.

Brokerages had advised investors to exercise caution while subscribing to the issue, pointing to concerns such as subdued ROE, inconsistent PAT and higher combined ratio of New India Assurance. “NIA’s combined ratio is consistently higher than 115%, which is impacting the profitability of the company…we recommend NEUTRAL rating on the issue,” Angel Broking said in its report. Choice Broking said that the valuations are not reasonable.  “We feel that that the investors can enter in this script at a lower price post listing and can hold it for a long period for better returns,” said the research firm in its report.

The issue comes soon after the IPOs of General Insurance Corporation, SBI Life Insurance, ICICI Lombard General Insurance. Collectively these three IPOs alone have raised about Rs 25,470 crore out of Rs 50,000 crore total money raised through public issues in 2017 so far.

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