LIC puts a$1billion bid for shares in NIAIPO
MARKET MATTERS The ₹9,600cr IPO subscribed subscribed 1.07 times MUMBAI:
The initial public offering (IPO) of state-owned New India Assurance Co. Ltd (NIA) wasfully subscribed on the back of a $1 billion (around ₹6,500 crore)bidbyLifeInsuranceCorp of India (LIC), said three people aware of the development.
The ₹9,600-crore NIA IPOwas subscribed1.04timesonWednesday,thefirstdayofthesharesale. NIA’s IPO is the second largest thisyearafterGeneralInsurance Corp of India Ltd’s ₹11,372-crore share sale in October.
“LIC bid for shares worth ₹6,500 crore onthefirst dayofthe offering, resulting in anoversubscription in theinstitutional portion of the offering. There were significant bids fromother institutional investors,” said one of the personscited above, requestinganonymity,asheisnotauthorised to speak with the media.
Theportionofsharesreserved for institutional investors in the NIA IPO saw a subscription of 2.13 times on Wednesday, while those reserved for retail investorsandhighnet-worthindividuals(HNIs)weresubscribed2%or (0.02 times) each.
At the end of the second day of the offering, on Thursday, The New India Assurance IPO was subscribed 1.07 times. The portion of shares reserved for institutional investors was subscribed2.16times,whilethosefor retailandhighnet-worthindividuals were subscribed 5% and 4% respectively.
The insurance firm has set a n pricebandof₹770-800fortheIPO, which values it at ₹64,392-67,940 crore. The offer will close on 3 November and will see a total stake dilution of 14.13%.
An email sent on Wednesday evening to LIC enquiring about its bid was not answered.
This is the second straight state-owned enterprise IPO, in whichthelargestinsurancefirm in the country has made a substantial bid. Last month, Mint reported that LIC had bid for sharesworth₹7,000-8,000crorein the GIC Re IPO.
The NIA IPO includes a fresh issue of ₹1,920 crore. NIAplansto use the proceeds from the fresh issue for augmenting its capital basetoaidgrowthandexpansion of business, improvingsolvency margin and solvency ratio.
TheCentre,inanofferforsale, plans to sell 96 million shares, which at the upper end of the price bandwillfetch₹7,680 crore.
NIA is the fourth insurance companytohittheprimarymarkets with a public offering this year.Sofarthis year,ICICI Lombard General Insurance Co Ltd, SBI Life Insurance Co. Ltd and GICRehavelistedonthebourses.
The NIA share sale comes at a time when the last three insur- ance IPOs have demonstrated weak listing-day performances.
Sharesofstate-ownedreinsurance company General Insurance Corp. of India Ltd (GIC Re) andSBILifeInsuranceCo.Ltdon Thursdayclosed8.03%and8.06% belowtheirrespectiveIPOprices of ₹912 and₹700 per share. Meanwhile, shares of ICICI Lombard GeneralInsuranceCo.Ltd,which went public in September, are trading at 2.88% above its issue price of ₹661 per share.
The initial share sale of NIA will be followed by HDFC Standard Life Insurance Co Ltd, a joint venture between Housing Development Finance Corp Ltd andStandardLife, whichislooking to raise ₹8,600 crore. The HDFC Standard Life IPO opens November 7.
The company has set a price bandof₹275-290 pershareforthe IPO.Attheupperendoftheprice band,HDFCStandardLifeInsurance will be valued at ₹58,277 crore. TheIPOwill see adilution of 14.92% stake.
NIA’s initial share sale is part of the government’s divestment plan to sell stakes in central public sector enterprises.
State-owned companies that have been cleared for IPOs include three defence ministry enterprises—Bharat Dynamics Ltd,GardenReach Shipbuilders andEngineersLtdandMazagon Dock Shipbuilders Ltd— along with MSTC Ltd and Mishra Dhatu Nigam Ltd, controlled by thesteelministry,NorthEastern Electric Power Corp. Ltd, which isunderthepowerministry,and Hindustan Aeronautics Ltd.