Most of the brokerages have conceded that the Rs 8,400 crore SBI Life IPO is mainly for long-term investors, and the issue is unlikely to see any listing gains. The price band of Rs 685-700 is certainly not cheap, say analysts.
The dull response to SBI Life Insurance IPO continued on the second of the 1-billion dollar public issue of the company, as the total bids received for the IPO stood at just 1,00,54,926 as against the total bids of 8,82,00,000 implying a subscription of 11%. As at the end of yesterday, the the public offer received bids for 82,81,413 shares against the issue size of 8,82,00,000 shares, a subscription of just 9% in total.
Most of the brokerages have conceded that the issue is mainly for long-term investors. R Sreesankar of Prabhudas Lilladher told FE Online, “The issue is certainly not cheap. It is for the long-term investor.” Prabhudas Lilladher has a subscribe rating on the issue given the long-term prospects. The price band of Rs 685-700 per share may be a put off for the retail investors, the issue may not elicit any listing gains. In conversation with FE Online, Harshin of BP Wealth said, “The retail investors looking for listing gains, may undersubscribe the issue as at the end of third day. We see the issue getting subscribed by 2-3 times.” Harshin, an analyst with BP Wealth says that the issue is at a premium, and investors with a long-term horizon of 2-3 years can look at subscribing the issue.
In its research note, Choice Broking said, “We assign a “Subscribe with Caution” rating for the issue. 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.” At the upper end of the price band at Rs 700, the issue is priced at 4.2 times its FY17 embedded value of Rs 165 per share, which is higher than ICICI Prudential’s 3.8 times its FY17 EV.
If history is anything to go by, out of 15 IPOs with issue sizes in excess of Rs 1,000 crore in 2016 and 2017 saw muted listing gains. Analysts say a comparison of valuations with listed peers can give some idea on how much listing gains one can expect from an issue. ICICI Prudential Life Insurance IPO listed at a discount of more than 1.5% last year, and the scrip shed more than 10% as compared with its issue price at the end of listing day at the bourses.