ICICI Prudential Life makes forgettable debut; stocks slump 11% on issue price

ICICI Prudential Life Insurance Co. Ltd made a disappointing debut on the stock markets on Thursday, with its shares ending almost 11% lower from the issue price after India’s biggest initial public offering in six years.

Shares of the life insurance unit of ICICI Bank Ltd, India's biggest private-sector lender, listed at Rs 329 apiece on the BSE, down 1.5% from the IPO price of Rs 334. The shares didn’t even manage to touch the issue and price and extended losses to close at Rs 297.65 each, giving the company a market value of Rs 42,722 crore ($6.4 billion).

The benchmark BSE Sensex traded 0.5% higher in the morning but ended 1.64% lower after India said its army had launched cross-border strikes on terror camps in Pakistan-controlled territory.

The IPO—the first in the insurance sector—was covered more than 10 times, and the company’s debut will likely temper expectations of a few other insurers that are looking to go public.

The IPO was also the largest by a local company since state-run Coal India Ltd's issue six years ago. ICICI Bank sold 181.34 million shares in the insurer for about Rs 6,050 crore ($904 million). The UK’s Prudential Plc, which holds almost 26% of the insurer, didn’t sell any shares.

To be sure, the targeted valuation at the IPO price of Rs 334 was $7.2 billion, almost 50% higher than last year when Singapore state investment arm Temasek and Wipro chairman Azim Premji’s private investment arm PremjiInvest acquired a stake in a deal that valued the company at $4.8 billion.

Ahead of the public share sale, the insurance firm raised Rs 1,636 crore by selling shares to 38 anchor investors including Morgan Stanley, Singapore sovereign wealth fund GIC, private equity firm Oaktree Capital and Dutch pension fund PGGM.

The insurer is one of India’s top three private-sector life insurance companies. SBI Life, a joint venture of State Bank of India and BNP Paribas, and HDFC Standard Life Insurance Company Ltd, a joint venture of mortgage lender Housing Development Finance Corp. and the UK-based Standard Life Plc, are the other top private-sector life insurers. HDFC Standard Life is merging with Max Life to create the largest private insurer in the country. This firm will be separately listed.

India’s crowded life insurance industry has 24 companies and the sector is dominated by state-run Life Insurance Corporation.

ICICI Prudential Life began operations in 2001. It had assets under management of Rs 103,939 crore as on 31 March 2016 and earned gross premium income of Rs 19,164 crore in 2015-16. Its profit after tax was Rs 1,653 crore in 2015-16.

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