The Niva Bupa Health Insurance IPO listing is scheduled in a few hours but the GMP down to mere 1% premium to issue price. The issue has been subscribed 1.90 times overall with the retail segment around 2.88 times. This along with the subdued GMP indicates that investor confidence in the IPO is not at its peak. The price band at Rs 70-74 per share is seen as aggressive by many market observers. This is considered to be a key reason for the subdued grey market premium.
The Niva Bupa Health Insurance IPO is a book built issue with a combination of fresh issue worth 10.81 crore shares totalling to Rs 800.00 crores and Rs 1400 crore offer for sale of 18.92 crore shares. The total issue size is of Rs 2,200.00 crores.
Niva Bupa IPO: JM Financial worried about industry growth prospects
The general insurance industry grow 27.6% YoY in October after a 6.5% YoY contraction in September. But JM Financial highlights that this “growth is led by crop business as three players, Bajaj Allianz, National Insurance and AIC (Agricultural Insurance Corporation), reported 100%+ YoY growth. This follows from September, wherein crop business contracted 24% YoY, in a seasonally strong month, where it had contributed to 25% of Sep’23 premiums.”
They explained that if they excluded this then growth for the insurance industry is around “If we exclude these three, industry growth normalizes to “9.0% YoY, a weak showing, especially as SAHIs continued their strong growth with a 25.1% YoY print. ICICIGI and Go Digit reported weak YoY growth of 7.5% and 7.8%, respectively. YTD growth stands at 14.3%/10.9%, gaining 35/2bps private market share YTD. Amongst SAHIs, Star disappointed with a weak 13.8% growth while Niva Bupa and Care reported 30%+ growth. Aditya Birla Health emerged as the growth leader with a 55% YoY growth, reaching a strong 41% YTD, as it focuses on growth in FY25. Commercial lines, led by flat premiums YoY in fire segment, has been weak this year. Motor and retail health had seen YTD growth of 9%/18.2% in H1.”
Overall according to the brokerage house the growth outlook is something they will wait and watch for the health insurance segment.
Niva Bupa IPO: Bajaj Broking says pricing aggressive
Over the past three fiscal years, Niva Bupa Health Insurance has reported muted profits. The FY24 profit is at Rs. 81.85 crore and fir Q1 of FY25 it recorded a loss of Rs 18.82 crore.
According to Bajaj Broking, “Historically, insurance companies experience a sluggish first half with most activities occurring in the second half of the fiscal year. Over the last three fiscal years, NBHICL has reported an average earnings per share (EPS) of Rs. 0.05 (basic) and an average return on net worth (RoNW) of -2.58%. The issue is priced at a price-to-book value (P/BV) of 6.19 based on its net asset value (NAV) of Rs. 11.95 as of June 30, 2024, and a P/BV of 4.73 based on its post-IPO NAV of Rs. 15.66 per share (at the upper cap). If we annualize FY25 earnings to the post-IPO fully diluted equity base, the asking price results in a negative price-to-earnings (P/E) ratio. Based on FY24 earnings, the P/E ratio stands at 642.22. Consequently, the issue appears to be aggressively priced.”