BackICICI Prudential Life IPO subscribed 10.44 times on last day
ICICI Prudential Life Insurance's IPO gets bids for 1.38 bn shares against 132.37 mn shares on offer
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Mumbai: ICICI Prudential Life Insurance Co. Ltd initial public offering (IPO) closed on Wednesday, with the issue, excluding the anchor book, drawing bids 10.44 times the number of shares on offer.
By 5:30pm Wednesday, the public issue—the first by an Indian insurance company and the largest initial share sale in six years—had received bids for 1.38 billion shares against 132.37 million shares on offer, stock exchange data showed.
The institutional investor category was subscribed 11.83 times the 32.64 million shares on offer, while the non-institutional category comprising high net-worth individuals, for whom a little more than 24.48 million shares were set aside, was subscribed 28.55 times.
Retail investors, whose investments cannot exceed Rs2 lakh per individual, subscribed to 1.32 times the 57.12 million shares reserved for them, data showed.
The portion reserved for shareholders—existing ICICI Bank shareholders as on 7 September looking to bid for additional shares—was subscribed 12.2 times.
Merchant bankers were enthused with the response, saying that quality issuances irrespective of the deal size will find quality investors.
Anup Bagchi, managing director and chief executive, ICICI Securities Ltd, said that the success of ICICI Prucdential Life’s public issue bodes well for the insurance sector as well as the Indian capital markets.
“ICICI Prudential Life’s IPO had a fantastic outcome. It reiterates that size is not a constraint for good assets and investors—across categories—have appetite for quality issuances. We need more large-sized IPOs, and ICICI Prudential is a landmark deal in the current context of fundraising. More importantly, the banking and financial services space will get further diversified with many insurance companies looking to go public," Bagchi said.
Investment banks ICICI Securities and Bank of America Merrill Lynch were the tier-I banks hired to manage the share sale. Other banks hired to manage the IPO were CLSA India Pvt. Ltd, Deutsche Equities India Pvt. Ltd, Edelweiss Financial Services Ltd, HSBC Securities and Capital Markets (India) Pvt. Ltd, IIFL Holdings Ltd, JM Financial Institutional Securities Ltd, SBI Capital Markets Ltd and UBS Securities India Pvt. Ltd.
ICICI Bank Ltd on Friday raised Rs1,635.33 crore by selling shares as part of the Rs6,056 crore public issue. India’s largest private sector bank by asset size sold 48.96 million ICICI Prudential Life shares to institutional investors via an anchor allotment. The sale took place at Rs334 per share. At the upper end of the issue price, ICICI Prudential Life is valued at Rs47,955 crore.
The anchor book is the portion of the IPO that bankers allot to institutional investors on a discretionary basis. The anchor book subscription opens a day before the launch of an IPO and acts as an indicator of institutional investor interest. Investors in the anchor book have to remain locked in for 30 days from the allotment.
In the grey market on Wednesday, ICICI Prudential Life shares quoted a premium of Rs18-20 per share, while an application for a minimum of 44 shares was trading at around Rs600-800 per application, said two dealers on condition of anonymity.
Grey market is an over-the-counter (OTC) market where IPO shares are bought and sold before officially listing on a stock exchange. In the unofficial market, three parties are involved. The financier gives money to an investor to apply for the IPOs. The investor or “applicant" uses his PAN card (proof that he is assessed for income tax), demat account (electronic account where shares are held in dematerialized form, a must for stock market transactions) and a bank account, and is paid a fee for making such applications. Then, an interested buyer gets the shares transferred to his account after the shares are listed.
ICICI Prudential Life filed its IPO proposal with the Securities and Exchange Board of India (Sebi) on 18 July and received the market regulator’s approval on 2 September.
Parent firm ICICI Bank Ltd is looking to divest a 12.63% stake in the life insurance arm through the offer-for-sale (OFS) route. Prudential Corp. Holdings Ltd is also expected to trim its stake in insurance company by up to 5.83% after its listing as part of the revised terms of the joint venture (JV) agreement.
ICICI Bank and Prudential agreed to shed their stake in the insurer with a floor of 54% and 20% stake, respectively, to make the listed entity compliant with the Sebi’s minimum public shareholding norms.
At present, ICICI Bank holds 67.52% and Prudential 25.83% as the two promoters of India’s largest private sector life insurer.
The rest is held by others, including billionaire investor Azim Premji’s firm Hasham Traders (4%) and Compassive Investment Pte. Ltd (2%), a wholly-owned unit of Temasek Holdings.
This was after ICICI Bank sold 6% stake in November 2015, which valued the insurance firm at Rs32,500 crore. The total deal value stood at about Rs1,950 crore.
Following the initial share sale, ICICI Bank’s stake in the insurer will drop to 54.89%, leaving little room for ICICI Bank to shed more stake as part of the foreign investment policy in the insurance sector.
ICICI Prudential Life posted consolidated revenue of Rs8,884.37 crore for the three months to June. Its net profit stood at Rs404.9 crore for the same period, according to the information available in the red herring prospectus.
The company reported consolidated revenue of Rs20,227.94 crore for 2015-16 compared to Rs33,955.76 crore in fiscal 2015. Its net profit for FY16 stood at Rs1,652.72 crore compared to Rs1,640.35 crore in the year prior, as per the prospectus.
As of 31 December 2015, ICICI Prudential Life had assets under management of Rs1.01 trillion.
The insurance sector has assets under management of Rs22.4 trillion, of which the share of India’s 23 private sector insurers is only Rs4.61 trillion, according to Insurance Regulatory and Development Authority of India. The insurance industry generated Rs3.28 trillion in premiums last year, of which the private sector’s share was Rs88,433 crore.
Other insurance companies are also looking to tap the market.
ALSO READ | Good that life insurance firms go IPO
In May,Business Standard reported that SBI Life Insurance, a joint venture of the State Bank of India and BNP Paribas Cardiff, is likely to sell shares to the public.
On 19 April, the board of Housing Development Finance Corp. Ltd, or HDFC, approved a proposal to sell around 10% in HDFC Standard Life Insurance Co. to the public.
In June, HDFC Standard Life, Max Financial Services Ltd and its unit Max Life Insurance Co. announced merger talks that may lead to the creation of an insurance firm with Rs1.1 trillion in assets.
The merger will eventually result in the listing of HDFC Standard Life, as Max Financial Services already trades on the Indian exchanges.
ALSO READ | Is ICICI Prudential IPO a precursor to more insurance floats?
The combination of the entities would become India’s largest private sector life insurer, surpassing ICICI Prudential Life Insurance. It will be second only to state-run Life Insurance Corp. of India (LIC), which has a 70% share of new business premiums in the country.
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