Shares of SBI Life Insurance Company Limited which had tapped the capital markets with its offer for sale of 12 cr shares in a price band of Rs 685-700 debuted at the bourses and had a decent start.
Unfortunately, the share came under pressure in the last hour or so and could manage gains of just over1%, closing at Rs 708 on the BSE and Rs 707.55 on the NSE.
Earlier the company had allotted 3.18 cr shares to 69 anchor investors comprising of 104 entities. The issue received a mixed response with QIB portion subscribed 12.56 times. The other three buckets which comprised of HNI, retail and shareholder reservation remained undersubscribed at 0.70 times, 0.85 times and 0.38 times respectively. It indeed was a poor response from half the issue clearly demonstrating that people found the issue expensive.

The price discovered was Rs 733.30 on the BSE where 3.31 lac shares were traded while it was Rs 735 on the NSE where 58.67 lac shares were traded in the preopen session. The share made a high of Rs 738 on the BSE and Rs 740 on the NSE respectively. The lows were Rs 702.25 and Rs 701.70. The total traded volume was 403.31 lac shares which was 33.61% of the IPO size and 45.73% of the non-anchor portion. The delivery volume was 221.59 lakh shares which was 54.94% of the traded volume and 18.47% of the IPO size. Considering that anchor investors cannot sell for 30 days this delivery percentage increases to 25.12% on the non-anchor size. The weighted average of the day’s trade was Rs 725.76 on BSE and Rs 725.24 indicating that the bulk of the trade has happened at higher levels. The price fall was in the last hour as mentioned earlier indicating selling pressure.

The share listed well but could not sustain. Its high time that some amount of greed is sacrificed for leaving money on the table for risk takers. Not every issue sees subscription of 200 times overall and 650 times by HNI’s.

Markets were under pressure and continued to correct through the first four days of the week. Friday however saw them trying to reverse the trend, however they surrendered almost all the gains in the last hour and closed virtually flat. BSESENSEX lost 638.72 points or 2.04% to close at 31,283.72 points. NIFTY lost 175.80 points or 1.80% to close at 9,788.60 points. September series futures expired with losses of 148.95 points or 1.52% to close at 9,768.95 points.

The primary market is on full throttle and we seem to have back to back issues one after the other. Last week was no exception and this week would be an example of yet another. The week begins with the anchor book of Godrej Agrovet and the listing of SBI Life Insurance on Tuesday. This would be followed by the listing of Prataap Snacks on Thursday. The issue of MAS Financial Services Limited would see its anchor allocation happening on the same day itself.

One wonders whether IPO valuation is reasonable or expensive? No one really cares if the issue gets subscribed. The added comfort to the merchant bankers is the hype that is created in the HNI segment and the funding that they enjoy. It is this group of less than 500 individuals who are responsible directly or indirectly for creating the grey market and providing it patronage. The wrong policy of the regulator in allowing HNI’s to bid for the QIB category and distort demand is shocking. One wonders when the QIB portion is not fungible where shortage in demand from QIB’s can spill over to HNI and retail, why allow HNI to bid for that? If this small and simple action is taken the ridiculous demand that is being seen for issues where over Rs 50,000 crs are raised for an IPO offering of a mere Rs 400 crs would stop. The only beneficiary in this entire game are the NBFC’s who fund this requirement.

The regulator would achieve three major things. Firstly a highly objectionable grey market would be made redundant. Secondly distortion of demand would stop where a mere 250-300 individuals are literally creating a complete false sense of demand. Thirdly price discovery and sustainability of the new issues would increase significantly as ipo pricing would be far more sensible and logical.

One hopes and prays that the new regulator looks into this key issue of allocation in IPO’s.

Keep your eyes on the market quarterly results and feet on the ground as we are not yet out of the woods.

Shares of ICICI Lombard General Insurance Company Limited listed on the bourses and as is the standard practice at the ICICI group began on a weak note. Shares were issued at Rs 661 and touched a low of Rs 638.15 on the BSE and Rs 638.25 on the NSE before a sharp turnaround saw prices rise. It appeared intraday players had begun to short the counter and their short covering led to the rally.

Earlier ICICI Lombard allotted 2,45,80,447 shares to 64 anchor investors comprising of 94 entities. The largest application has been made to Nomura of 18.15 lakh shares which amounts to 7.4% of the anchor allotment. Domestic mutual funds have been allocated 86.30 lakh shares which is 35.11% of the total allotment. The anchor book was impressive on all counts.

The subscription by QIB’s was indeed positive while that from non-institutional investors was tepid and was just about subscribed. The institutional portion was subscribed 8.17 times. The main concern by these investors was the previous performance of ICICI Prudential and the steep valuations being asked for ICICI Lombard.

The share listed at Rs 650 on the BSE and Rs 651.10 on the NSE against the issue price of Rs 661. It fell to Rs 638.15 and Rs 638.25 and then began the recovery. It wasn’t smooth sailing and after crossing Rs 661 there were many small swings. Th high of the day was Rs 694 on both the exchanges. The closing price was Rs 681.55 on the BSE and Rs 681.20 on the NSE.

The traded volume was 405.23 lakh shares which was 47% of the issue size of 862.47 lakh shares. Delivery volume was 164.84 lakh shares which was 40.68% of traded volume and 19.11% of IPO size. Certainly, the little interest shown by HNI’s and the grey market deals are the ones which have resulted in the delivery. The weighted average of the day’s trade was Rs 666.29 on the BSE and Rs 668.28 on the NSE. This indicates that other than those who traded at the beginning of the day when the price discovery happened, people have by and large recovered their cost. It’s a different issue that the recovery at the weighted average was less than a percent.The share closed with gains of a little over 3%. Th positive outcome of this listing has been the breaking of the jinx of ICICI shares closing below issue price on day one.

A large issue has listed and shown that the pricing was expensive. Even though institutional support for the company and the interest in the insurance sector in India which is a growing one drove demand, the outcome was disappointing. One Hopes SBI Life Insurance to list later does not belie expectations.