New India Assurance shares fall 10% on stock market debut
Mumbai: Shares of New India Assurance Co. Ltd (NIA) closed 9.4% below issue price on the company’s first day on the bourses, after an initial share sale that barely scraped through.
After opening at Rs748.90 on the BSE, 6.39% below the issue price of Rs800, NIA shares fell further to close at Rs725.05, down 9.37%. During the day, NIA shares touched a high and a low of Rs749 and Rs717.75, respectively.
Benchmark equity index Sensex shed 0.84% to close at 33,033.56 points.
The state-owned general insurer had priced its shares at Rs770-800 in its Rs9,600 crore initial public offer (IPO), which was subscribed 1.19 times.
Many analysts had recommended avoiding the IPO and questioned its steep valuation, given the relatively lower returns the general insurer offers.
“Insurance sector—there has been an overdose of IPOs in the last 6-8 months,” said Anuradha Thakur, joint secretary, department of investment & public asset management (Dipam) in the ministry of finance.
Of the six insurance companies that were listed in 2017, three are trading below their issue price—including the two state-run companies General Insurance Corporation of India (GIC Re) and NIA.
“I think what we would think is GIC perhaps was the only reinsurance company—may be there was a gap there in terms of understanding the products of the company, and NIA came on very close on the heels of GIC,” Thakur told reporters at an event in Mumbai.
“Immediately, we had HDFC (Standard) Life, too,” she added.
The government is currently working on a plan to list three other state-run general insurers—United India Insurance Co. Ltd, Oriental Insurance Co. Ltd and National Insurance Co. Ltd.
“We have to get through the IPO for three more, but we will factor this entire sentiment of the market before we come in,” Thakur said, adding the government will look into the timing and price, after assessing the market.
According to the company’s red herring prospectus filed with the markets regulator, NIA’s return on equity (RoE) stood at 8.6% for fiscal year 2016-17, compared to private peers ICICI Lombard General Insurance Co. Ltd and Bajaj Allianz General Insurance’s 20.3% and 23.1%, respectively.
It reported operating profit for only one out of five fiscal years to 2017. For fiscal years 2016 and 2017, the company reported an operating loss of Rs877.65 crore and Rs486.03 crore, respectively.
Incorporated in 1919, NIA offers insurance products in key business verticals such as fire insurance, marine insurance, motor insurance, crop insurance and health insurance.
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