The initial public offering (IPO) of SBI Life Insurance Co Ltd crossed the halfway mark on the second day of the issue on Thursday led by institutional investors even as it got a lukewarm response from high-net-worth individuals (HNIs) and retail investors.
The public offer of 88.2 million shares, excluding the anchor allotment, received bids for 50.87 million shares, stock-exchange data showed. The book was subscribed 58%.
The qualified institutional buyers (QIBs) category was covered 1.6 times the 21.2 million shares reserved for it. The portion of 37.1 million shares for retail investors, where bids cannot exceed Rs 2 lakh, was covered 37.5%. The non-institutional investors category, comprising corporate bodies and wealthy investors, was covered a little more than 8%.
HNIs typically bid on the final day of a public offering to keep their IPO financing costs at a minimum. They borrow short-term capital from various avenues, barring banks, to fund their IPO applications. HNIs deploy a small fraction of their own capital—called margin money—upfront. The additional capital raised through short-tenure loans helps HNIs and wealthy investors place large bids.
SBI Life’s IPO, which is the biggest in India in seven years, made a slow start and was covered only 9% at the end of the first day on Wednesday. State-run Coal India Ltd’s Rs 15,500-crore share sale in 2010 was the biggest-ever public offering.
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 shares. SBI owns a 70.1% stake in the insurer while the Dutch partner 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.