SBI Life Insurance extends fall, slips below IPO price

At 09:32 AM; SBI Life Insurance was trading at Rs 694 on BSE, a 1% below its issue price of Rs 700, as compared to 0.14% rise in the Sensex.

SBI Life Insurance Company was down 1% at Rs 693 in intra-day trade, falling below its initial public offer (IPO) price of Rs 700 per share on the National Stock Exchange (NSE) and BSE. The stock hit its lowest level since listing on Tuesday, October 3, 2017.

At 09:32 AM; the stock was trading at Rs 694 on BSE, a 1% below its issue price, as compared to 0.14% rise in the S&P BSE Sensex. A combined 217,060 shares changed hands on the counter on BSE and NSE so far.

SBI Life Insurance Company had made a quite debut by listing at Rs 735, a 5% premium against its issue price of Rs 700 per share on the NSE. The stock was down 6% from its high level of Rs 738 touched on the NSE in intra-day trade on first day of its listing.

SBI Life’s Rs 8,400-crore IPO last month had received 3.6 times demand than the shares on offer. Bulk of the bids (nearly 85%) came in from institutional investors, while the retail and high net worth individual (HNI) portion of were not fully subscribed.

Most brokerages had advised their clients to subscribe to the offering with a long-term investment horizon.

SBI Life Insurance is riding on ULIP business (71% annualised premium equivalent or APE mix) which has lower regulatory risk, lower capital requirement and long term opex benefit, but also has lower margins and is highly dependent on capital market performance. SBI Life is increasingly focusing to improve protection business share which is high margin and have moderate opex.

Analysts at Prabhudas Lilladher believe operating return on embedded value (RoEV) to remain stable at 23% currently and improve post over‐run margins to around 18% by FY19 from currently 15%.  At the upper band of Rs 700, the company would trade at 3.18x Sep‐19 EV which we believe is fully priced, the brokerage firm said in IPO note.