SBI Life plans In­dia’s first bil­lion-dol­lar IPO in 7 years

Gulf News - - Your Money -

SBI Life In­sur­ance Co will launch this week what will be In­dia’s first bil­lion-dol­lar ini­tial pub­lic of­fer­ing since 2010, paving the way for a record-set­ting year for IPOs in the coun­try.

SBI Life, a unit of top In­dian lender State Bank of In­dia (SBI), will open the share sale to the pub­lic on Septem­ber 20 and close it on Septem­ber 22, ac­cord­ing to a fil­ing.

The shares, that will be­gin trad­ing on Oc­to­ber 3 will be sold in a price range of Rs685-Rs700 apiece, rais­ing as much as Rs84 bil­lion ($1.3 bil­lion, Dh4.77 bil­lion) for SBI Life’s main share­hold­ers — SBI and BNP Paribas Cardif — which are par­ing their stakes.

Strong stock mar­kets have fu­elled a surge in eq­uity deals in Asia’s third-largest econ­omy, with IPO pro­ceeds so far this year cross­ing $3 bil­lion. While last year’s $4 bil­lion fundrais­ing from IPOs is set to be sur­passed, some ex­pect pro­ceeds to even top the record $8.5 bil­lion raked in seven years ago.

Steep val­u­a­tions

High in­flows in­clud­ing from re­tail in­vestors into eq­uity mar­kets are driv­ing sec­tors that his­tor­i­cally never listed in In­dia to ex­plore IPOs, said Arun Ke­jri­wal, founder of Ke­jri­wal Re­search & In­vest­ment Ser­vices.

“This au­gurs well for the cap­i­tal mar­kets. How­ever a note of cau­tion: val­u­a­tions are steep,” Ke­jri­wal added.

SBI Life’s IPO, the third in­surer to list in the coun­try, will be the big­gest since state-run Coal In­dia’s Rs155 bil­lion ($2.4 bil­lion) IPO in 2010.

ICICI Lom­bard Gen­eral In­sur­ance Co’s IPO to raise up to $890 mil­lion opens on Fri­day, while HDFC Stan­dard Life In­sur­ance is ex­pected to hit the mar­kets in com­ing weeks with what is likely to be an­other bil­lion-dol­lar of­fer­ing.

That will be fol­lowed by two other big in­surer listings — state-run rein­surer Gen­eral In­sur­ance Corp of In­dia (GIC Re) and non-life in­surer New In­dia As­sur­ance Co, es­ti­mated to raise a to­tal of more than $3 bil­lion.

Val­u­a­tion

While the in­sur­ers are bet­ting on lower pen­e­tra­tion and ris­ing in­come lev­els bol­ster­ing de­mand for their prod­ucts, the gov­ern­ment’s plan to pare its stake in five state-run gen­eral in­sur­ers through IPOs is also go­ing to drive of­fer­ings.

In the SBI Life IPO, SBI is sell­ing up to an 8 per cent stake, while BNP Paribas Cardif is sell­ing up to 4 per cent. The two cur­rently own 70 per cent and 26 per cent, re­spec­tively.

The IPO price range val­ues the in­surer at about $11 bil­lion, ver­sus the $7 bil­lion val­u­a­tion at which SBI sold a nearly 4 per cent stake to KKR and Te­masek in De­cem­ber.

The list­ing comes at a time when In­dian banks, in­clud­ing the SBI, need bil­lions of dol­lars to make higher pro­vi­sions for record soured as­sets and meet stricter global bank­ing reg­u­la­tions known as Basel III by March 2019.

Basel III, de­signed to avoid a rep­e­ti­tion of the 2008 fi­nan­cial cri­sis, in­clude tighter cap­i­tal re­quire­ments.

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