SBI Life Insurance, a subsidiary of India's largest lender State Bank of India, made stock market debut on Tuesday. SBI Life Insurance shares rose as much as 6 per cent to an intraday high of Rs 740 compared to its issue price of Rs 700. SBI Life Insurance Company's Rs 8,400 crore initial public offer (IPO), the biggest ever by any insurance company in India, was subscribed 3.58 times led by strong demand from institutional category, which was subscribed 12.56 times. The portions reserved for non-institutional and retail investors were subscribed 70 per cent and 81 per cent respectively.
SBI Life's IPO was purely an offer for sale by existing investors. SBI has sold 8 crore shares while BNP Paribas Cardif SA has sold nearly 4 crore shares through this IPO.
At the upper price band of Rs. 700, SBI Life shares were valued at 4.2 times its embedded value, compared to 3.8 times for its listed peer ICICI Pru Life Insurance Company. However, analysts have said that the premium valuation of SBI life shares is justified because of its leadership position in new business premium.
SBI Life's parent SBI has a mammoth network of around 24,000 branches, which has helped the company in generating new business premium on a consistent basis, say analysts.
Insurance industry is still under-penetrated in India with total sum assured as a percentage of country's GDP remaining at 70 per cent compared to 270 per cent in case of US, 260 per cent in Japan and 226 per cent in Singapore.
As of 12:50 pm, SBI Life Insurance shares traded 3.5 per cent higher at Rs 724.55 compared to issue price of Rs 700.