ICICI Lombard IPO subscribed 98% a day before close

Institutional portion fully subscribed, retail 60% covered, wealthy investor portion subscribed just 8%

The Rs 5,700-crore initial public offering (IPO) of ICICI Lombard, country’s largest private sector general insurer, was subscribed 98 per cent a day before its close. The institutional portion of the offering has was subscribed 2.4 times, retail portion has been 62 per cent covered and wealthy investor portion was subscribed just 10 per cent. The IPO closes on Tuesday. The price band for the IPO is Rs 651 to Rs 661 per share. At the top-end of the price band, ICICI Lombard, a joint venture between private sector lender ICICI Bank and Canada's Fairfax Financial Holdings, will be valued at nearly Rs 30,000 crore.

The entire IPO is offer for sale (OFS) by ICICI Bank and Fairfax, who are offloading their seven per cent and 12 per cent stake respectively.

Many brokerages are recommending their clients to subscribe to the IPO for "long-term gains".

"At the upper band of Rs 661, the company trades at 46.5 times March 2017 earnings. Return on equity is also expected to remain strong in the range of 18-20 per cent on high investment income and better operating efficiency. The company has robust payout ratio. Hence, we recommend subscribing for long-term gains," Prabhudas Lilladher says in a note.

Analysts say ICICI Lombard can be a play on high-growth potential offered by non-life insurance sector. India remains an underpenetrated market, with penetration of non-life insurance at just 0.77 per cent compared to a global average of nearly three per cent. Crisil expects the non-life insurance market to double in the next 4-5 years.

The company may attract adequate investor interest as it is the first general insurance listing, the under-penetration in the sector and the company's healthy financials. If so, the stock may list at premium to the issue price. If that does not happen, then investors should be ready to expect returns only in the long term," says a note by Centrum.