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

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.