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ICICI Prudential stock slumps on trading debut

MUMBAI (NewsRise) --Shares of ICICI Prudential Life Insurance, a unit of India's biggest private lender ICICI Bank, got off to a weak debut on stock exchanges, falling as much as 11.5%, as investors jettisoned the stocks amid concerns of expensive valuation.

ICICI Prudential opened trading with a 1.5% decline from the issue price, at 329 rupees a share ($4.9) on the BSE after a $910 million initial public offering, the first by an Indian life insurance company. The weak performance follows another lackluster listing - that of L&T Technology Services, a unit of industrial conglomerate Larsen & Toubro - last week.

Still, ICICI Prudential's offer, the biggest in nearly six years, comes at a time when India's IPO market is surging amid hopes of a strong rebound in economic growth after Prime Minister Narendra Modi's government unveiled a series of policy reforms. In the first half of this year, Indian companies raised as much as $1 billion selling shares, according to researcher Prime Database.

Shares of ICICI Prudential closed 10.88% lower at 297.65 rupees, while that of parent ICICI Bank dropped 3.76% in Mumbai trading. The benchmark S&P BSE Sensex lost 1.64%.

Analysts had earlier warned investors looking for listing gains to stay away from the ICICI Prudential IPO, saying the issue was fully priced even as the company has enough scope for growth in future.

Santosh Singh, head of research in India at Haitong Securities, said the right valuation for the company is around 10%-12% lower than the issue price, suggesting investors looking to enter the stock could buy it at around 300 rupees.

"This is a great company, but it was priced at the upper range," Singh told local television channel CNBC TV18 on Thursday. "If one is trying to make listing gains it might not be there. You have to hold this company for a longer duration."

The insurer's IPO earlier this month saw demand outstripping the number of shares offered by more than 10 times. The company had priced the shares between 330 rupees and 334 rupees apiece. At the upper end of the price band, the issue valued the venture at 480 billion rupees.

The offer, which closed last week, received bids for 1.39 billion shares, or 10.48 times the 132 million shares on offer.

ICICI Bank that owns nearly 68% of the unit pared its stake to almost 55% post the IPO, while the U.K.'s Prudential PLC, which owns about 26% of the insurer, didn't sell any stake.

In the fiscal year that ended in March, ICICI Prudential earned a net premium of 189.99 billion rupees, the company said in a regulatory filing.

Chanda Kochhar, the managing director of ICICI Bank, said the weak listing is reflective of the challenges facing a "first-time mover."

"As we have gone through the journey of understanding the valuations, as regulators have gone through the journey of understanding the processes and documentation to be followed, I'm sure the markets would also go through the process of understanding the valuation," Kochhar told reporters after the listing.

India's underpenetrated insurance market has lured a number of global insurers to strike up partnerships with local companies. Last year, the country eased foreign holdings rules in insurance companies, allowing foreign companies to own up to 49% stake in local ventures, up from 26%.

ICICI Prudential's Rival HDFC Standard Life, a joint venture between Indian mortgage lender Housing Development Finance Corporation and the U.K.'s Standard Life, earlier this year initiated the process for a share sale.

But last month, it agreed to buy smaller rival Max Life Insurance, under which the insurer along with its listed parent Max Financial Services will be rolled into HDFC Life, making the combined company a public-traded entity.

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