The initial public offering (IPO) of state-owned New India Assurance Co. Ltd (NIA) was fully subscribed on the back of a $1 billion (approximately Rs6,500 crore) bid by Life Insurance Corp. of India (LIC), said three people aware of the development.
The Rs9,600 crore NIA IPO was subscribed 1.04 times on Wednesday, the first day of the share sale. NIA’s IPO is the second largest this year after state-owned General Insurance Corp. of India Ltd’s Rs11,372 crore share sale in October.
“LIC bid for shares worth Rs6,500 crore on the first day of the offering, resulting in an oversubscription in the institutional portion of the offering. There were significant bids from other institutional investors too,” said one of the persons cited above, requesting anonymity, as he is not authorised to speak with the media.
The portion of shares reserved for institutional investors in the NIA IPO saw a subscription of 2.13 times on Wednesday, while those reserved for retail investors and high net-worth individuals (HNIs) were subscribed 2% or (0.02 times) each.
At the end of the second day of the offer, on Thursday, the New India Assurance IPO was subscribed 1.07 times. The shares reserved for institutional investors were subscribed 2.16 times, while those for retail and high net-worth individuals were subscribed 5% and 4% respectively.
The insurance firm has set a price band of Rs770-800 for the IPO, which values it at Rs64,392-67,940 crore. The offer will close on 3 November and will see a total stake dilution of 14.13%.
An email sent on Wednesday evening to LIC enquiring about its bid was not answered.
This is the second straight state-owned enterprise IPO in which India’s largest insurance firm has made a substantial bid.
Last month, Mint reported that LIC had bid for shares worth Rs7,000-8,000 crore in the GIC Re IPO.
The NIA IPO includes a fresh issue of Rs1,920 crore. NIA plans to use the proceeds from the fresh issue for augmenting its capital base to support growth and expansion of business, improving solvency margin and solvency ratio.
The government, in an offer for sale, plans to sell a total of 96 million shares, which at the upper end of the price band will fetch Rs7,680 crore.
NIA is the fourth insurance company to hit the primary markets with a public offering this year.
So far this year, ICICI Lombard General Insurance Co Ltd, SBI Life Insurance Co. Ltd and GIC Re have listed on the Indian bourses.
The NIA share sale comes at a time when the last three insurance IPOs have demonstrated weak listing-day performances.
Shares of state-owned reinsurance company General Insurance Corp. of India Ltd (GIC Re) and SBI Life Insurance Co. Ltd on Thursday closed 8.03% and 8.06% below their respective IPO prices of Rs912 and Rs700 per share. Meanwhile, shares of ICICI Lombard General Insurance Co. Ltd, which went public in September, are trading at 2.88% above its issue price of Rs661 per share.
The initial share sale of NIA will be followed by HDFC Standard Life Insurance Co. Ltd, a joint venture between Housing Development Finance Corp. Ltd and Standard Life, which is looking to raise Rs8,600 crore.
The HDFC Standard Life IPO opens 7 November.
The company has set a price band of Rs275-290 per share for the IPO. At the upper end of the price band, HDFC Standard Life Insurance will be valued at Rs58,277 crore. The IPO will see a dilution of 14.92% stake.
NIA’s initial share sale is part of the Union government’s divestment plan, under which the Department of Investment and Public Asset Management (Dipam) plans to sell government stakes in several central public sector enterprises through various routes such as IPOs, offers for sale and strategic sales.
State-owned companies that have been cleared for IPOs include three defence ministry enterprises—Bharat Dynamics Ltd, Garden Reach Shipbuilders and Engineers Ltd and Mazagon Dock Shipbuilders Ltd—along with MSTC Ltd and Mishra Dhatu Nigam Ltd, controlled by the steel ministry, North Eastern Electric Power Corp. Ltd, which is under the power ministry, and Hindustan Aeronautics Ltd.
NIA is the fourth public sector undertaking IPO this year. Apart from GIC Re, which went public in October, Housing and Urban Development Corp. Ltd and shipbuilder Cochin Shipyard Ltd are the other state-owned companies that went public this year, as part of the disinvestment plans.