ICICI Prudential loses on Initiative, tanks on Debut Day

ICICI Prudential Life Insurance has been the much talked about IPO of late. The insurer has been the first in its line to launch an IPO and that too as huge as that of Rs. 6000 crore. ICICI Prudential IPO has been the country’s biggest in six years and has been oversubscribed 10.5 times with the retail portion oversubscribed by 1.42 times. The HNI portion was oversubscribed by 28 times.

Listing on the NSE:

ICICI Prudential Life Insurance listed at Rs. 330, 1.2% below its issue price of Rs. 334 on the NSE. In the morning, the freshly listed IPO was trading at Rs. 331.60 and had hit a high of Rs. 333.80. The stock opened at Rs. 330, below its IPO issue price of Rs. 334. The weak debut was not unexpected as the valuation was already quite stretched, not leaving much for the investors. The stock dipped around 12% to Rs. 295.15 taking along the ICICI Bank share price as well. So far over 8.5 crore shares have changed hands over the NSE trading window.

Is the Stock a Strong Buy?

ICICI Prudential is an insurance company and the logic of being patient when it comes to insurance applies on it as well. The stock has promised steady returns if the investors stay put. Insurance is a patient form of capital and a patient form of business. It is all about underwriting long-term policies. It is yet very early to judge the stock. Most analysts believe that ICICI Prudential may not be the multibagger but it has the potential to deliver steady returns in the near term.

The company has the Asset under Management worth 1.1 lakh crore at the end of Q1FY17 of which 73% is invested in Unit-linked Assets. This makes ICICI prudential life the largest fund managers in India. The company has been generating highest new business premiums, consistently, every financial year, among all private sector life insurers in India since FY02 on a retail-weighted received premium basis.

Although the investment opportunity in India is large, still one cannot expect insurance to yield the phenomenal 10 times, 20 times or 30 times kind of returns in coming two-three years.

The Jhunjhunwala Association:

The billionaire investor and the stock market wiz. Rakesh Jhunjhunwala had put in the application worth Rs. 750 crores for the freshly closed IPO of ICICI Prudential Life Insurance. Since, the HNI portion was highly oversubscribed, the celebrated investor is expected to get the shares worth Rs. 27 crores. The allotment is being made on the proportionate basis. The total net worth of the Street King stands at USD 2.2 billion. The question is will the association of the stock with the king Midas will benefit the shares of the company?

Other than Mr. Jhunjhunwala, the software tycoon, Azim Premji owns 4% in ICICI Prudential Life Insurance through his investment arm Premji Invest. The association of these big names have extended the valuation of the stock and the market is yet to see if these names will influence the stock and in what ways?

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