Opinion Poll

Headline : GIC Re's mega IPO subscribed 80% on Day 1; QIB demand strong
News Date : Oct 11, 2017
Source : AIP News Bureau
Almost all broking houses have given thums up to the GIC Re's mega issue.


The initial public offer (IPO) of  the state owned General Insurance Corporation of India (GIC Re) has seen saw robust demand as the issue got subscribed 79 per cent on the first day of the bidding process on Wednesday. 

At Rs 11,370-crore and the issue would be India's third biggest after Coal India's Rs 15,200 crore and Reliance Power's Rs 11,700 crore issues.
The price band forthe issue has been fixed at Rs 855 - Rs 912 per share. The offer constitutes 14.22 per cent of the post-offer paid-up equity share capital. 

The issue received bids for 9,93,04,384 shares as against 12,47,00,000 shares on offer. 

Qualified Institutional buyers quota was subscribed 1.56 times, retail was subscribed nearly 6 per cent, while other segments saw negligible subscription till 5 pm on Wednesday. 

The company is giving a discount of Rs 45 per share to retail investors and eligible employees. Investors can bid for a minimum of 16 shares and in multiples of 16 thereafter. 

GIC Re is the largest reinsurance company in India in terms of gross premiums accepted in fiscal 2017. The company, according to CRISIL Research, accounted for nearly 60% of the premiums ceded by Indian insurers to reinsurers in FY17.

Almost all broking houses have given thums up to the  GIC Re’s mega issue.

According Prabhudas Liladher, at the upper band of Rs 912, the company trades at 27.4x Mar-17 EPS which we believe is fairly priced, but given the liquidity in the markets and company’s performance in the recent past, we recommend to Subscribe for long term gains.

GIC Re showed strong net premium growth at 73% YoY mainly led by four-fold jump in crop insurance premium collections in FY17 due to the implementation of Pradhan Mantri Fasal Bima Yojana (PMFBY) scheme whereas fire insurance continues to grow stable at ~23%. GIC Re does not look to increase third party motor business and health group business which has historically had high losses and has not been a profitable business line, said  the broking house.. 

The issue appears fairly priced considering a return ratio of ~16% RoE and PAT CAGR of mere 5.7% over FY13-17. On other parameters, GIC has healthy financials with Incurred Claims ratio of 81.6%, combined ratio of 100.2% and solvency ratio of 2.41x as on Mar’17. GIC being a leading reinsurer in India with ~60% market share, could continue to see a stable growth, going ahead. However, given the full valuation and size of the issue (one of the biggest IPOs in last few years), the stock is expected to give returns only in the long term, said Centrum Broking. .

Another broking hosue IIFL said gross premium growth for GIC Re should remain sturdy in the coming years owing to: a) sustained brisk growth in Indian non-life insurance industry; b) expanding reinsurance market in India and c) tapping of new global markets including the largest ones. The potent combo of likely inroads into global market along with better pricing in domestic market should further improve the combined ratio in the medium term, save for any untoward loss.  




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