ICICI Lombard General Insurance pares losses, gains 4% against issue price

ICICI Lombard General Insurance Company pared losses to gain as much as 4% after getting listed at Rs 650, 2% lower that its initial public offer (IPO) price of Rs 661 per share on the BSE. The stock listed at Rs 651 on the National Stock Exchange (NSE). Post listing, the stock hit a high of Rs 694 and a low of Rs 638 on BSE so far.

At 12:38 pm, it was trading 2.5% higher at Rs 677 against its issue price on BSE and NSE. A combined 6.44 million shares changed hands on the counter on both the exchanges.

The Rs 5,700-crore IPO of ICICI Lombard garnered three times subscription. Its 61.67-million share offering saw a total bid of 183.6 million shares.

Nearly 78% of the bids came from institutional investors, with the qualified institutional buyer (QIB) seeing eight times more demand than the shares on offer. The retail investor category saw 1.2 times subscription; high net worth individual (HNI) segment was subscribed only 83%, the stock exchanges data shows.

Many brokerages have recommended their clients to subscribe to the IPO with a long-term investment horizon.

"ICICI Lombard is the largest non-life private sector insurer in India. It is a joint venture between ICICI Bank and Fairfax Financial Holdings Ltd of Canada. Backed by strong parentage, and under penetration of non-life insurance business in India, the company has been on a strong growth path with its Gross Direct Premium Income growing by 26.7% over FY2015-17," Angel Broking said in IPO note.

At the upper price band of Rs 661 the issue is offered at 8x its FY2017 BV. While on the reported numbers it might appear to be fairly valued, we believe with strong potential to deliver high double digit growth for next multiple years, the issue looks decently priced, it added.

During Q1 FY18, ICICI Lombard’s market share stood at 10% among all non-life insurers in India and 20.2% among the private players (as per provisional and unaudited figures released by IRDAI). It has been growing faster than the market underpinned by robust franchise strengths that includes a comprehensive product portfolio, multi-channel distribution network, delivering superior customer experience and prudent risk selection and management.

"Barring FY16, where the company’s operating performance was impacted by high level of claims incurred, company’s financial performance in the past four years has steadily improved. The loss ratio has headed south, driving a decline in the combined ratio. Prudent management translated into superior return on the gross investments too. Consequently, company’s PBT grew at brisk 18% pa during FY14-17. During Q1 FY18, PBT growth was robust at 59% yoy," IIFL Wealth Management said in IPO note.