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.
SBI Life reported a net profit of Rs. 955 crore on total investment income of Rs. 1,064 crore in FY2017. Its embedded value, a key valuation metrics for insurance companies, has grown from Rs. 12,548 crore in FY2016 to Rs. 16,538 crore in FY2017, showing a growth of nearly 32 per cent.
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.