The initial public offering (IPO) of SBI Life Insurance Company Ltd was covered 3.7 times on the final day of the issue on Friday led by institutional investors even as high-net-worth individuals (HNIs) and retail investors stayed away.
The public offer of 88.2 million shares, excluding anchor allotment, received bids for 324.25 million shares, stock-exchange data showed.
The qualified institutional buyers (QIBs) category was covered 12.56 times the 21.2 million shares reserved.
The portion of 37.1 million shares for retail investors, where bids cannot exceed Rs 2 lakh, was covered 82%. The non-institutional investors category, comprising corporate bodies and wealthy investors, was covered nearly 70%.
The employee quota was subscribed 1.02 times, data showed.
On the grey market, the premium on the SBI Life stock dropped significantly to Rs 8-10 per share from Rs 25-30 earlier this week, two market dealers told VCCircle. The grey market is a pseudo, over-the-counter market where IPO shares are traded before official listing on a stock exchange.
The decline in the grey market premium, and weak participation of retail investors and HNIs was due to a fall in the secondary markets on Friday. Indian shares ended lower for a fourth straight session on Friday, weighed down by banking stocks, as the government’s plans of a $7.7-billion stimulus raised concerns over the fiscal deficit.
Besides, major Asian indices were rattled Friday morning following a threat from North Korea to conduct another hydrogen bomb test in the Pacific Ocean.
SBI Life’s IPO, the biggest in India in seven years, had made a slow start and was covered only 9% at the end of the first day on Wednesday. It got some push from institutional investors and was subscribed 58% at the end of day two on Thursday.
India's second-largest private-sector life insurer is looking to raise as much as Rs 8,400 crore ($1.3 billion) for parent firm State Bank of India and Dutch joint venture partner BNP Paribas Cardif, valuing the insurance firm at Rs 70,000 crore.
The public issue comprises a sale of 120 million shares, representing a 12% stake dilution on a post-offer basis. SBI, India’s biggest bank, is selling 80 million shares while its Dutch partner is selling the remaining. SBI owns a 70.1% stake in the insurer while BNP Paribas Cardif holds 26%.
SBI Life raised Rs 2,226 crore ($346 million) from anchor investors including Canada Pension Plan Investment Board (CPPIB) and the sovereign wealth funds of Singapore, Abu Dhabi, Kuwait and Norway. It sold 31.8 million shares to a bunch of anchor investors at the upper end of the Rs 685-700 price band a day ahead of its IPO.
The SBI board had given in-principle approval to initiate the process of floating an IPO of its life insurance arm in March. SBI Life had filed its draft IPO proposal with the Securities and Exchange Board of India on 17 July. The capital markets regulator issued final observations on SBI Life’s IPO on 4 September.
JM Financial Institutional Securities, Axis Capital, BNP Paribas and Citigroup are among the eight merchant bankers managing the IPO. The others are Deutsche Equities India, ICICI Securities, Kotak Mahindra Capital Company and SBI Capital Markets.