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HDFC Life shares buck trend, soar on debut after $1.3 bn IPO

HDFC Life's rival SBI Life has also shed 6.4 percent since its listing last month after a $1.3 billion IPO

Reuters  |  Mumbai 

Representative Image
Representative Image

Co's shares soared by more than a fifth in their trading debut on Friday after a $1.3 billion initial public offering, bucking a trend of tepid market debuts by Indian insurers due to worries over their valuations.

By 8.40 GMT, shares were trading at Rs 352 ($5.40), below an earlier high of Rs 369 and compared to the price of Rs 290. The gains marked the best opening day performance in seven years by a billion dollar-plus India

Institutional seemed to have overlooked a richer valuation for compared to its peers to buy into one of India's top-three private sector life insurers and the most-profitable in the segment.

The gains were aided by an upgrade of India's sovereign bond rating on Friday by Moody's, which lifted the main Mumbai market index up 1 per cent.

"The appetite for the despite the valuations... was strong at the issue stage especially from the institutional segment," said Deven Choksey, managing director at KR Choksey Shares & Securities.

The institutional part of the sale was oversubscribed more than 16 times, while the portion reserved for retail shareholders was not fully covered, reflecting the concerns over high valuations.

was priced at 4.7 times its 2017/18 embedded value versus SBI Life's 3.9 times and ICICI Prudential's 3.4 times, according to a pre-note from brokerage Centrum.

Choksey of KR Choksey said those institutional who could not get shares from the were likely buying the shares from the secondary market, adding that long-term could continue their purchases.

Record year

Insurers are set to benefit from relatively low insurance penetration rates in a country of 1.3 billion people and as more people shift to financial assets from savings in physical assets.

India has seen a record year for IPOs with initial share sales topping $11 billion so far in 2017. HDFC Life's was the fourth billion-dollar plus this year.

HDFC Life's two main shareholders - Housing Development Corp and Standard Life - sold a combined 15 per cent stake in the insurer's which was subscribed nearly five times overall.

The gains in shares were partly helped by the Moody's upgrade of India's sovereign bond ratings, while traders covering short positions also helped accentuate the rise, said Arun Kejriwal, founder of Kejriwal Research and Information Services.

Most other recent insurer listings, which were the main driver for the record sales this year, have been weak.

State-run General Insurance Corp, which listed on October 25 after a $1.7 billion that was the biggest this year, is trading 11.6 per cent lower. And New India Assurance Co, the biggest non-life insurer and whose raised $1.5 billion, fell around 9 percent this week.

HDFC Life's rival SBI Life has also shed 6.4 percent since its listing last month after a $1.3 billion

"The over-valuation concerns remain," said Kejriwal of Kejriwal Research, referring to insurance listings.

First Published: Fri, November 17 2017. 15:31 IST