HDFC Life’s $1.34 bn IPO subscribed nearly five times
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The initial public offering (IPO) of HDFC Standard Life Insurance Company Ltd concluded on Thursday with bids nearly five times the number of shares on offer, stock-exchange data showed.

India’s third-largest private-sector life insurer, which offered 219.76 million shares excluding the anchor portion, received bids for a little over 1.07 billion, the data showed. The book was subscribed 4.88 times, with the bulk of demand coming from institutional and wealthy investors.

Qualified institutional buyers (QIBs) bid 16.6 times the 53.37 million shares for them. Foreign institutional investors accounted for a chunk of the QIB book, which also saw bids from mutual funds and domestic institutions such as banks, financial companies and insurance firms.

Non-institutional investors, comprising corporate bodies and high-net-worth individuals, bid 2.2 times the shares reserved for them.

Retail investors, for whom there is a Rs 2-lakh cap per application, bid for about 90% of the 93.41 million shares set aside for them.

The undersubscription highlights their lack of confidence in aggressively-valued insurance firms. Most recent listings in both life and non-life space, including ICICI Lombard General Insurance, SBI Life Insurance Co Ltd and General Insurance Corporation (GIC Re), have fallen short of investor expectations.

Last week, New India Assurance’s Rs 9,600 crore ($1.5 billion) IPO was rescued by insurance behemoth Life Insurance Corporation (LIC) of India and a clutch of state-owned banks as mutual funds, foreign institutions, retail individuals and wealthy investors stayed away from bidding their entire portion.

ICICI Prudential Life Insurance was the first Indian insurance firm to go public. Its shares also dropped on market debut.

HDFC Life’s IPO was subscribed 46% on the first day of the issue on Tuesday. It ended with 1.17 times demand at the end of the second day.

Earlier this week, the company had raised Rs 2,322 crore ($359 million) from anchor investors including the sovereign wealth funds of Singapore, Kuwait and Abu Dhabi. The life insurer sold about 8.07 crore shares to 76 anchor investors at the upper end of the Rs 275-290 price band.

HDFC Standard Life was seeking to raise Rs 8,695 crore ($1.34 billion) via the IPO at a valuation of Rs 58,260.22 crore.

Deepak Parekh, chairman of mortgage lender HDFC Ltd, the parent of HDFC Standard Life, had said the issue was priced right and investing in insurance IPOs was a long-term bet.

HDFC owns 61.65% and Standard Life 35% in the insurance company, while minority shareholders own the rest.

HDFC Standard Life had filed its draft red herring prospectus with the Securities and Exchange Board of India on 19 August, and had received regulatory nod on 13 October.

The IPO was set in motion after the company’s plans for a merger with billionaire Analjit Singh-promoted Max Financial Services Ltd hit a regulatory hurdle.

Though the IPO was part of HDFC Life’s initial plan, it had subsequently considered a merger that would have resulted in the creation of India’s largest private sector life insurer with an annual premium worth Rs 25,500 core, surpassing ICICI Prudential Life Insurance Co. Ltd.

After the Insurance Regulatory and Development Authority had turned down the merger proposal, both companies had said that they would file a revised merger structure, but it did not materialise.

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