The near Rs 10,000 crore IPO of state-owned New India Assurance saw sluggish demand on Day 2, after getting fully subscribed on Day 1, backed by strong demand from institutional investors.
The near Rs 10,000 crore IPO of state-owned New India Assurance saw sluggish demand on Day 2, after getting fully subscribed on Day 1, backed by strong demand from institutional investors. Notably, the Rs 9,600 crore IPO was subscribed by more than 95% within four hours of opening. As at end of Day 2, the total bids were received for 12,87,36,306 shares as against 12,00,00,000 shares. Overall, the issue was subscribed 1.07 times, data with exchanges showed. The QIB portion saw demand to the tune of 12,57,66,990 shares as against their reserved quota of 5,82,00,000, implying subscription of more than 2.15 times. The retail investor portion saw muted demand and investors put in bids amounting to 5% 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 6,17,814 shares, implying subscription of more than 3.5%. The retail investors subscribed for a total of less than 20.8 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 1.61 times on NSE while the same was below 0.55 on BSE.
The issue will close on November 3. 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 is offering 12 crore equity shares out of which there is a fresh issue of 2.4 crore shares and remaining 9.6 crore shares will be sold by the government though offer for sale. The bids can be made for a minimum of 18 equity shares and in multiples of 18 equity shares thereafter. The company has offered a retail discount and an employee discount of Rs 30 per equity share on offer price. The company has set a price band of 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.