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GIC Re’s $1.7 bn IPO subscribed 90% on day two

12 October, 2017

The initial public offering (IPO) of state-run reinsurance firm General Insurance Corp of India (GIC Re) was covered 90% on the second day of the issue on Thursday on the back of continued strong demand from institutional investors.

The IPO received bids for nearly 111.67 million shares for the 124.7 million shares on offer, stock-exchange data showed.

The portion set aside for qualified institutional buyers received bids 1.67 times the 62.27 million shares on offer. A sizeable portion of this came from insurance behemoth Life Insurance Corporation (LIC) of India.

Retail investors, whose bid value cannot exceed Rs 2 lakh per application, bid for 16% of the shares reserved for them. Retail investors will get a discount of Rs 45 per share.

The non-institutional investors category, comprising high-net-worth individuals and corporate bodies, bid for just 1% of the shares reserved for them. HNIs typically bid on the final day of a public offering to minimise their IPO financing costs. For this, they borrow short-term capital from various avenues, barring banks, and deploy only a small fraction of their own capital—called margin money—upfront.

The share sale was covered 80% on the first day of the issue on Wednesday.

GIC Re’s IPO is India’s second-largest offering after Coal India Ltd’s maiden share sale of Rs 15,500 crore in October 2010. The state-run reinsurer is seeking to raise as much Rs 11,372 crore ($1.7 billion), at a market valuation of Rs 79,976.37 crore (12.3 billion).

In the grey market on Thursday, shares of GIC Re were quoting at a discount of Rs 20-25 on the issue price, said a market dealer on the condition of anonymity.

Mumbai-based GIC has set the price band for the IPO at Rs 855-912 per share. The IPO closes on 13 October.

The offering comprises a fresh sale of shares worth Rs 1,568 crore and an offer for sale worth Rs 9,804 crore by the government. The public offer will result in a 14.22% stake dilution. The government will get three years from the listing date to meet the minimum public shareholding norms of 25%.

GIC Re, the 12th largest reinsurance firm globally by gross premium written, joins a growing list of Indian insurance firms that have either firmed up plans for a public offering or already gone public. These include SBI Life Insurance Co, ICICI Lombard General Insurance, New India Assurance, HDFC Standard Life Insurance Co, and Reliance General Insurance Co.

ICICI Prudential Life Insurance had become the first life insurer in India to go public last year.

The government’s stake stake in GIC Re is part of its record disinvestment target of Rs 72,500 crore for the current financial year to contain the fiscal deficit at 3.2% of the gross domestic product.

Citigroup Global Markets India, Axis Capital, Deutsche Equities India, HSBC Securities and Capital Markets (India), and Kotak Mahindra Capital Company are the merchant bankers managing the IPO.

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GIC Re’s $1.7 bn IPO subscribed 90% on day two

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