SBI Life Insurance lists at 5% premium to IPO price of Rs 700

SBI Life Insurance Company made a quite debut by listing at Rs 735, a 5% premium against its initial public offer (IPO) price of Rs 700 per share on the National Stock Exchange (NSE).

At 10:02 AM; the stock was trading at Rs 734 on the NSE. It hit a high of Rs 740 and low of Rs 730 so far. A combined 11.5 million shares exchanged hands on the NSE and BSE.

The company’s Rs 8,400 crore IPO was subscribed 3.587 times. The portion meant for qualified institutional buyers (QIBs) was oversubscribed 12.56 times, while that of non-institutional investors received 70% subscriptions and retail investors 85%, data available with the NSE showed.

SBI Life is a joint venture between India’s largest lender State Bank of India and BNP Paribas Cardif, the insurance holding company of France.

SBI Life Insurance is the largest private insurer in terms of new business premium (NBP) generated with 20.04% market share and has assets under management (AUM) of Rs 97,700 crore. The company is riding on ULIP business (71% 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. Hence, we believe Operating 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 and hence we recommend to Subscribe for long term gains,” analysts at Prabhudas Lilladher said in IPO note.

The brokerage firm Motilal Oswal Securities is positive on SBI Life Insurance for long term as life Insurance sector in India provide huge opportunities for growth. SBI Life Insurance has delivered Premium Income/ PAT growth of 19%/11% in FY13-17. Further the company has delivered strong ROEs in excess of 17% consistently for last 5 years.

“At upper price band, the issue is priced at P/B of 11.9x (Q1FY18) and PE of 73.3x (FY17) post issue. While the valuation looks higher compared to other listed financial companies (like NBFCs and Private banks), we believe premium valuations are justified due to large private life insurer with a consistent growth, backing by pre-eminent promoters, multi-channel distribution and high agent productivity and consistent ROEs,” the brokerage firm said in a note.