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LIC, PSU banks bail out New India Assurance’s $1.5 bn IPO; Khadim subscribed 45%

03 November, 2017

Life Insurance Corporation of India and a clutch of state-owned banks rescued New India Assurance’s Rs 9,600 crore ($1.5 billion) initial public offering as mutual funds, foreign institutions, retail investors and wealthy investors stayed away from bidding.

The public offering of 120 million shares was subscribed about 1.19 times after receiving bids for a little over 143.18 million shares, stock exchange data showed.

The portion set aside for qualified institutional buyers received bids for 2.33 times the 58.2 million shares on offer.

The issue saw a handful of bids from foreign portfolio investors and mutual funds.

“We did not feel left out. Why would one invest if the shares would be available at a lower price in the near future? The pricing was not right and therefore it is not prudent for mutual funds to burn investor money,” said the chief of investments at a top domestic mutual fund who did not wish to be named.

Retail investors, whose bid value cannot exceed Rs 2 lakh per application, bid for just 11% of the shares reserved for them despite the Rs 30 per share discount offered to them. The non-institutional investors’ category, comprising high net-worth individuals and corporate bodies, bid for 11.6% of the shares reserved for them.

Even employee category remained undersubscribed, data showed.

Deven Choksey, managing director, KR Choksey Shares & Securities, said the issue needs to be priced well for it to succeed.

“Investor, especially retail investors, will not find an issue attractive if it is not marketed well. More importantly, an issuer needs to leave some money on the table,” Choksey said.

The issue received 1.04 times the bids on the first day of bidding on Wednesday, stock exchange data showed. It saw little progress on the second day with the issue subscribed 1.07 times.

NIA, India’s biggest non-life insurance firm, is seeking Rs 65,934.06 crore ($10.21 billion) in market valuation at the upper end of the Rs 770-800 price band for the issue. The public issue will result in a 14.56% stake dilution for the government in the general insurance firm.

The government will get three years from the date of listing to bring its stake to 75% or below to comply with capital markets norm of minimum 25% public float. The government owns 100% stake at the time of IPO.

NIA filed its draft prospectus for an IPO on 9 August. It received the Securities and Exchange Board of India (SEBI)’s nod on 15 September.

Kotak Mahindra Capital, Axis Capital, IDFC Bank, Nomura Financial Advisory and Securities (India) and Yes Securities are financial advisers to the IPO.

NIA joins a growing list of Indian insurance firms—life and non-life—that are either going public or already listed on the bourses.

Last month, state-owned reinsurance firm General Insurance Corporation of India (GIC Re) listed on the bourses in what was the second-biggest Indian IPO.

SBI Life Insurance Co Ltd also listed on the exchanges in early October.

HDFC Standard Life Insurance Co’s IPO will open next week. ICICI Lombard General Insurance Co and Reliance General Insurance Co went public in September and October, respectively. ICICI Prudential Life Insurance became the first life insurer in India to go public last year.

Khadim India
The IPO of footwear maker Khadim India was subscribed 45% on the second day of the offering as retail investors continued to show their support.

That is some progress from Thursday when the issue received 14% bids for its shares.

The public offering of 5.07 million shares, excluding the anchor allotment, received bids for 2.29 million shares, stock exchange data showed.

Retail investors bid for 83% of the 2.53 million shares set aside for them.

Qualified institutional buyers’ (QIB) portion was subscribed 9.1% of the 1.45 million shares on offer. Non-institutional investors subscribed 2.1% of shares reserved for them.

On Wednesday, Khadim raised about Rs 162.92 crore ($25.21 million) by selling shares to anchor investors ahead of the IPO. The company sold 2.2 million shares to 13 anchor investors at the upper end of the Rs 745-750 price band set for the IPO, it said in a statement. The IPO closes on Monday.

The Rs 543.05 crore IPO comprises a fresh issue of shares worth Rs 50 crore, besides a sale of 6.57 million shares by Fairwinds and Siddhartha Roy Burman, chairman and managing director at Khadim India.

The firm, which is the second-largest retailer of footwear in India in terms of the number of exclusive stores, is seeking a valuation of Rs 1,347.24 crore ($207.84 million) through the IPO. The company will see 40.3% stake dilution on a post-issue basis.

Khadim India had filed its draft red herring prospectus with SEBI in July. It got the regulator’s approval in September.

Fairwinds, which first invested in the company in 2013, will sell its entire 33.83% stake, or 5.85 million shares.

VCCircle had first reported in April that Khadim was considering an IPO and had hired investment bankers, nearly a decade after it first attempted to go public in 2007. Axis Capital Ltd and IDFC Bank Ltd are managing the offer.

It had planned to sell 5.5 million shares, or a 30% stake, to raise a tad less than Rs 100 crore, according to the company’s DRHP.

Khadim competes with homegrown footwear companies and listed peers such as Relaxo Footwears Ltd, Bata India Ltd, Sreeleathers Ltd and Liberty Shoes.

Axis Bank and IDFC Bank are merchant bankers for Khadim’s IPO.

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LIC, PSU banks bail out New India Assurance’s $1.5 bn IPO; Khadim subscribed 45%

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