Slide show after listing raises questions on GIC, NIA IPO pricing
NIA is tenting new lows daily and trades 27.44% lower than its issue price, GIC Re shares are trading at 11.85% lower than its IPO price band
Mumbai: Stocks of state-run insurers General Insurance Co. of India (GIC Re) and New India Assurance Co Ltd. (NIA) that went public recently have fared poorly since listing, raising questions on their issue pricing and future share sale plans of other public insurers.
NIA, which went public on 13 November, fell 9.4% from its issue price on its listing day. Now, it is testing new lows daily and trades 27.44% lower than its issue price in less than a month. Similarly, GIC Re trades 11.85% lower than its issue price.
This is in contrast to HDFC Standard Life Insurance Co. Ltd, which listed a mere four days after NIA. Not only did its shares gain 18.71% on debut, they now trade almost 34% higher than the issue price.
Investment bankers said the government got the pricing for these issues wrong by comparing them with private sector rivals.
“State-owned insurers did not leave much on the table for investors at their IPO, and that is reflecting now,” said R. Sreesankar, co-head of institutional equities at Prabhudas Lilladher Pvt. Ltd.
“The similar preference battle that we have between private banks and PSU banks will come up in the insurance space too. For now, the private insurers look better than the state-run peers in terms of grabbing market share.”
GIC Re and NIA are yet to be rated by analysts.
Bankers who managed the issue also pointed out that investors were being cautious with insurance IPOs.
“Top quality investors had lost money with ICICI Prudential. They were treading water cautiously,” said a banker who had managed one of the issues floated by the public insurers.
ICICI Prudential Life Insurance Co. Ltd, which listed in September 2016, had seen its shares fall 10.88% on debut. A year later, the stock is up 9.85% from the issue price.
“Plus, there was an oversupply of papers in the insurance space, which made it difficult to attract quality investors for these issues,” said the banker on condition of anonymity.
Insurance companies collectively raised around Rs44,967.40 crore through IPOs this year as benchmark equity indices scaled new peaks. BSE’s 30-share Sensex has gained 23.75% this year.
Another factor is the huge shareholding of Life Insurance Corp. of India. It holds 8.42% and 8.67% in GIC Re and NIA respectively. Dealers said that since a major chunk from the new share sales was bought by LIC—a long-term investor—it impacted the liquidity of these stocks.
“(Investments in) GIC Re—it is in line with what you call forward integration or backward integration, whatever it is, because they are our reinsurers,” LIC chairman V.K. Sharma told reporters while announcing half-yearly results. He said these firms were good investment bets from a long-term perspective.
There are also concerns on the road ahead for other three state-owned insurers vis-a-vis listing—United India Insurance Co. Ltd, Oriental Insurance Co. Ltd and National Insurance Co. Ltd.
On 13 November, Anuradha Thakur, joint secretary, department of investment and public asset management (Dipam) in the ministry of finance, said that the government will look into the timing and price of these IPOs after assessing market sentiment post the dismal debut of NIA
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