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Asia300

ICICI Lombard's $888 million India IPO oversubscribed

More insurers plan share sales as India IPO market poised for record levels

MUMBAI (NewsRise) -- ICICI Lombard, the general insurance unit of India's top private lender ICICI Bank, saw its 57 billion-rupee ($888 million) initial public offering getting oversubscribed on the last day of the sale, as investors continue to bet on Asia's third-largest economy.

The share sale was oversubscribed about 2.93 times, reflecting the boom in India's primary market heading for a record this fiscal year. More insurers, including HDFC Life and National Insurance Co., are readying IPOs in the next few months.

SBI Life Insurance, a joint venture between the nation's biggest lender State Bank of India and France's BNP Paribas Cardiff, is set to open its up to 84 billion-rupee offering for subscription later this week, in what could become India's largest IPO in seven years.

The share sale of ICICI Lombard -- a joint venture between ICICI Bank and Canada's Fairfax Financial Holdings -received bids for about 181 million shares, or 2.93 times the 61.67 million shares offered, according to provisional data on the National Stock Exchange. The company's two major shareholders are shedding a combined 86.2 million shares, or a 19% stake.

The IPO of India's largest private non-life insurance company was priced between 651 rupees and 661 rupees apiece. The sale opened for subscription on Friday.

The institutional part of the offer got bids for 60.47 million shares, or 3.69 times the 16.39 million shares on offer, boosted by foreigners bidding for 22 million shares. The retail portion was undersubscribed with bids of 11 million shares, or 0.36 times the 29 million shares on offer for that category.

Last week, ICICI Lombard raised over 16.25 billion rupees from 64 anchor investors, including Nomura Trust and Banking Co., BlackRock and Citigroup Global Markets, by selling 24.5 million shares, according to exchange data.

Insurers are lining up IPOs after the India last year eased rules related to foreign holdings in insurance companies. The new rules allow foreign companies to own as much as 49% stake in local insurance ventures, up from 26%.

India continues to be an underpenetrated market with a non-life insurance penetration of 0.77%, compared with the global average of 2.81%, brokerage Geojit said in a report dated Sept. 14. This provides enough growth headroom to Indian non-life insurance players, it said.

At the upper end of the price band, ICICI Lombard was available at a price to earnings multiple of 46.5 times its fiscal year 2017 earnings. "Despite the steep valuation, robust business and industry growth opportunity provide favorable risk-reward ratio in the long-term. We recommend Subscribe," Geojit said.

Shares of ICICI Bank gained 0.60% in Mumbai trading, while the benchmark S&P BSE Sensex lost 0.07%.

--Dhanya Ann Thoppil

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