GIC Re shares fall 4.56% on market debut
Mumbai: Shares of state-owned General Insurance Corp. of India Ltd’s (GIC Re) debuted 14.5% below their issue price in an otherwise vibrant market on Wednesday, before recouping some losses to close 4.56% lower.
The disappointing debut comes after the state-owned reinsurer’s Rs11,372 crore initial public offer (IPO)—the second largest in India—was subscribed 1.38 times earlier this month.
GIC Re shares opened at Rs850 against the issue price of Rs912, and touched a high of Rs895 and low of Rs780.25, before closing at Rs870.40. In comparison, the benchmark 30-share Sensex closed 1.33% higher at a record 33,042.50 points.
Life Insurance Corp. of India (LIC) bid for Rs7,000-Rs8,000 crore in the GIC Re IPO, Mint reported on 12 October, citing unnamed officials. An e-mail sent to LIC seeking a response was not replied to.
The largest IPO in India remains state-owned Coal India Ltd’s Rs15,200 crore share sale in 2010.
“The issue was sold majorly to one large investor, instead of selling it to a wider set of institutional investors. This hurt the liquidity of the stock and listing suffered despite broader market doing well,” said Deven Choksey, group managing director, KR Choksey Investment Managers Pvt. Ltd.
“The implementation of initiatives taken by the government including divestment of PSUs (public sector undertakings) has to be proper and well-planned. The success factor has been eluding them due to lack of proper implementation,” added Choksey.
Arun Kejriwal, director of Kejriwal Research and Financial Services Ltd said that after a weak start, there was short selling that added to the pressure on GIC Re stock, and the stock saw short covering after it reached the retail allotment price of Rs867. “People have to understand the business of insurance and reinsurance. These are new concepts in the listed space for Indian investors and they are yet to be absorbed,” said Kejriwal.
Also, the IPO did not excite non-institutional investors or high net worth individuals and retail investors, partly due to the large size of the issue. The portions set apart for them were subscribed only 0.22 times and 0.63 times respectively.
The other state-run insurance company which was listed earlier this month, is also trading below its issue price.
SBI Life Insurance Co Ltd, which was listed on 3 October, is trading 4.5% below its issue price, despite listing at a premium.
GIC Re is the largest reinsurance company in India in terms of gross premiums received in fiscal year 2017 and accounts for around 60% of the premiums ceded by Indian insurers to reinsurers during the fiscal year.
The company offers reinsurance services in key businesses such as fire (property), marine, motor, engineering, agriculture, aviation, health, liability, credit and financial liability and life insurance.