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The Rs 11,175 crore initial public offer (IPO) of General Insurance Corporation (GIC Re), the third biggest IPO in the Indian primary market so far, managed to scrape through on Friday with 1.37 times subscription on the last day of the issue. However, the retail investors’ quota of the IPO evoked a poor response and remained undersubscribed.
The qualified institutional quota (QIB) of the IPO received a good response from institutional buyers led by Life Insurance Corporation (LIC), bailing out the IPO. QIB portion was oversubscribed 2.25 times with the buyers putting Rs 12,770 crore against the reserved portion of Rs 5,680 crore. LIC applied a major chunk of the QIB quota on the second day of the offer with its bids accounting for almost two-third of the QIB subscription, said a market source.
Retail investors quota remained undersubscribed at 60 per cent with investors putting bids worth only Rs 2,283 crore as against the reservation of Rs 3,779 crore. The quota reserved for non-institutional investors (including high networth investors) got only 22 per cent subscription. They applied for shares worth Rs 374 crore as against the quota of Rs 1,704 crore. The undersubcribed portion reserved for retail investors and NIBs will be given to QIBs. The IPO was priced in a band of Rs 855-912.
“There’s a perception that the IPO was priced at a high premium. It has not left anything on the table for the retail investors. Many of the investors look for a decent premium after listing. There’s a tendency among issuers to charge high premium. This will kill the IPO market,” said an investment banker tracking the IPO market. Overall, GIC Re IPO got bids for 17.06 crore shares as against the offer for sale of 12.47 crore shares. “Though the GIC public issue has pulled through, it is worrisome that more than 50 per cent is reportedly subscribed by LIC… this does not augur well for future issues by other PSU Insurers,” said KK Srinivasan, former member, IRDA. The government will get over Rs 9,000 crore from the GIC IPO proceeds. “The government may have to rethink the timing of IPOs of other insurers. LIC also cannot afford to invest disproportionately in a single sector. There is also the issue of investing policy holders funds in a way that adds value to the policy holders of LIC,” he said.
Public sector New India Assurance (NIA) is expected to launch its Rs 6,000-7,000 crore IPO within a few weeks. SBI Life’s Rs 8,400-crore public issue was oversubscribed 3.58 times recently. SBI Life IPO received bids for 31.53 crore shares against the total IPO size of 8.82 crore shares, excluding anchor investors’ portion.
The reserved category of QIBs saw oversubscription of 12.55 times while the portion set aside for non-institutional investors has subscribed 69 per cent and retail investors 84 per cent. Several companies are planning to raise close to Rs 1 lakh crore through IPOs from the capital market in the coming months. The list of companies that plan to launch their IPOs includes several insurance firms, banks and even stock exchanges, after five years of a dry run in the primary market. As many as 22 companies have already raised over Rs 29,000 crore from the market in calendar 2017 so far, the highest since 2010 when 64 companies mobilised Rs 37,534 crore from the public.