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Fairfax-backed ICICI Lombard’s $886 mn IPO covered three times on final day

19 September, 2017

The initial public offering of ICICI Lombard General Insurance Co., India’s largest non-life insurer in the private sector, was subscribed nearly three times on the third and final day of the issue on Tuesday thanks to institutional bidders.

The public offering of 61.67 million shares, excluding the anchor allotment portion, had received bids for almost 183.5 million shares at the end of bidding, stock exchange data showed.

The quota for institutional buyers was covered about 8.2 times while the portion reserved for retail individual investors was subscribed 1.2 times. Non-institutional investors, which include corporate houses and wealthy investors, bid for 82% of the shares reserved for them.

The IPO was covered 27% on the first day on Friday and 98% at the end of bidding on Monday.

The offering is the second public float by an ICICI Bank affiliate company in the past one year. In September 2016, ICICI Prudential Life Insurance Co. Ltd had launched a Rs 6,056-crore IPO, the biggest primary market offering in six years.

The IPO had received strong investor response but made a disappointing debut on the stock markets, with its shares ending almost 11% lower from the issue price of Rs 334 apiece. The shares have since recovered and ended at Rs 423.45 apiece on Tuesday.

The general insurer’s share sale also pales in comparison to a few other IPOs this year. Last week, construction firm Capacit’e Infraprojects Ltd attracted record demand as its IPO was covered 183 times. The IPOs of Central Depository Services Ltd and Avenue Supermarts, which runs hypermarket chain D-Mart, had also received strong response from investors.

ICICI Lombard is a joint venture of ICICI Bank and Canadian billionaire Prem Watsa-led investment firm Fairfax Financial Holdings Ltd. The IPO comprises an offer for sale of 86.24 million shares by ICICI Bank and Fairfax.

The Rs 5,701-crore offering ($886 million) will result in a 19% stake dilution. ICICI Lombard is seeking roughly Rs 30,000 crore in valuation through the IPO.

Fairfax is selling 54.48 million shares through the IPO. It currently owns 99.46 million shares, or a 21.92% stake, in the insurance firm. ICICI Bank is selling 31.76 million shares. This will bring its stake to nearly 56% from 62.95%.

Fairfax is selling the stake because it has decided to start a new general insurance joint venture in India and needs to trim its holding in ICICI Lombard to below 10% as per regulatory requirements. Indian regulations do not allow foreign investors to own a higher stake in two insurance companies. A foreign investor can own up to 49% of an Indian insurer.

Ahead of the IPO, ICICI Lombard had raised Rs 1,625 crore from anchor investors including the sovereign wealth funds of Kuwait and Abu Dhabi by selling 24.58 million shares at the upper end of the Rs 651-661 price band.

ICICI Lombard was set up in 2001, after the Indian insurance industry opened up to private players. It is the largest private sector non-life insurer in India based on gross direct premium income.

The company had filed its draft IPO proposal with the capital markets regulator on 14 July. The proposal was approved on 1 September.

The general insurer has appointed Bank of America Merrill Lynch, ICICI Securities Ltd and IIFL Holdings Ltd as lead merchant bankers. It has also appointed CLSA India Pvt. Ltd, Edelweiss Financial Services Ltd and JM Financial Institutional Securities Ltd.

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Fairfax-backed ICICI Lombard’s $886 mn IPO covered three times on final day

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