The mega IPO from SBI Life Insurance Company that hit the market in the fourth week of September this year, got fully subscribed, but the response was anything spectacular.
The issue, that came with a price band of Rs 685 - 700 per share, was subscribed 3.58 times and the company fixed the issue price at the upper end of the band.
The stock made its debut on the bourses today and the counter is attracting pretty strong volumes. However, gains are not any significantly impressive.
The stock made quite a decent start and rose to Rs 740 on the National Stock Exchange, after opening at Rs 735. However, it started retreating soon and declined to a low of Rs 701.70 by mid afternoon. At Rs 708, the stock is up by about 1.1% from the issue price. On BSE, the stock touched a high of Rs 738 and a low of Rs 702.25.
On BSE, the SBI Life Insurance counter has clocked a volume of about 4.6 million shares so far in the session. On the National Stock Exchange, the counter has clocked a volume of more than 30 million shares so far in the session.
Prior to the IPO, the company had mopped up Rs 2226 crore by selling shares to 69 anchor investors. The shares were allotted to the anchor investors at Rs 700 per share, the top end of the Rs 685 to Rs 700 per share price band for the IPO.
The promoters of SBI Life Insurance, State Bank of India diluted up to 8 crore shares while BNP Paribas Cardif SA offloaded 4 crore shares. SBI held a 70.10% stake in the company, while BNP Paribas Cardif held 26%.
The company is the country's largest private life insurer in terms of new business premium and is a subsidiary of State Bank of India, which is among the top fifty banks in the world in terms of assets.
At Rs 700, the valuation of SBI Life Insurance's Earnings Per Share for financial year 2016-17 worked out to about Rs 9.55 and the P/E for the year at 73.33 multiple. Price to book (PB) ratio will be 12.6 at the upper end of the price band.
Still, valuation of SBI Life Insurance looks fair, compared to the valuation of the other players in the life insurance space. The very large agent network and the company's extensive reach thanks to the banking giant are expected to help boost business going forward.
SBI Life Insurance saw an annual increase in its total income by nearly 20% in the four years from 2012-13, to around Rs 30,300 crore.
The stock is a good one for long term and investors willing to wait patiently can consider picking it up at current levels and accumulate on dips.