New India Assurance IPO fully subscribed on Day 1

State-owned New India Assurance (NIA) received good response on its first day of initial public offering (IPO).

The company is offering 12 crore equity shares and as per the data available on stock exchanges - the issue received bids of over 12.51 crore equity shares – subscribing by 1.04 times.

Such performance was driven by Qualified institutional buyers (QIB) who tapped this issue by 1.59 times on NSE. 50% of the total equity shares was alloted to QIB while 15% was kept aside for non-institutional investors (NII) and remaining 35% for retail individual investors (RII).

Price band for this issue was fixed at lower end of Rs 770 per share and upper end of Rs 800 per share.

NIA through this issue plans to raise about Rs 9,600 crore – which would be the second largest IPO after state-owned General Insurance Corp's Rs 11,000 crore IPO this year.

Government has planned to dilute its stake in a list of five general insurance companies one of which is New India Assurance. The total issue of NIA constitutes 14.56% of the post offer paid-up share capital of NIA.

IPO consists of an offer for sale (OFS) of 9.6 crore shares (11.65% of post-dilution equity) by the Government of India and a fresh issue of 2.4 crore shares (2.91% of post-dilution equity).

Money raised through fresh issue will be used for meeting the future capital requirements, improving the solvency margin and consequently the solvency ratio; and other general corporate purposes. 

Payal Pandya, Research Analyst at Centrum Wealth said, “The issue appears expensive considering a very low return ratio of mere 6.8% RoE, operating loss of Rs 901 crore and declining net profit.”

According to CRISIL, NIA is the largest general insurance company in India in terms of net worth, domestic gross direct premium, profit after tax and number of branches as of FY17. 

Market capitalisation post NIA's IPO issue is expected to range between Rs 63,448 crore and Rs 65,920 crore.