SBI Life's $1 billion Initial Public Offering

By Shivam Saklani

All of us must have observed the SBI Life Insurance Company Limited’s advertisement, which had been making a prominent appearance in most of the reputed newspapers.

The company, through advertisements was proposing to make an IPO. An IPO or initial public offer, is the first time that the stock of a private company is offered to public.

SBI really came in big, with this IPO prospect and went on to offer 8,82,00,000 shares to general public. SBI Life has fixed a price band of Rs. 685 to Rs. 700 per share for the offer, which is India’s biggest in 7 years. The initial share offer will close on 22^nd September i.e. you still have a couple of days left, in case you are interested. Bids can be made for a minimum of 21 equity shares and minimum of 21 equity shares thereafter. The equity shares are listed on BSE as well as NSE.

SBI Life Insurance is a joint venture between the Bank and BNP Paribas Cardiff, wherein SBI owns 74% of the total capital and BNP Paribas the rest. After this stake sale, SBI’s stake in the arm is proposed to come down to 70.1% while BNP will continue to hold 26%

The stock market was really progressive for IPOs till mid-September, wherein many companies saw their stocks rise, even by a humongous rate of 102% in a very short period. SBI Life had also reported a profit of Rs. 954.65 crore in 2016-17. This made a perfect environment for SBI to launch its IPO.

Even after the entire favorable environment, there was still a speculation in the market, as it is a known fact that IPO can be a risky investment for the individual investor, as it is tough to predict, what the stocks will do on its initial day of trading in the near future because there is often very little to analyze and there is always a sense of uncertainty regarding their future values. This sense of uncertainty also prevailed in stock market as the public offer received bids for 852,81,413 shares against the issue size of 8,82,00,000.

SBI Life has already garnered Rs. 2,226 crore from anchor investors, some of which include Blackrock, Canada Pension fund, Govt of Singapore, HSBC, HDFC MF, ICICI Prudential MF, Kotak MF, Reliance MF etc, from among 69 of the total anchor investors.

With these figures, most brokerage firms believe that the investment is good only if the investor is planning for long term investment. An investor can enter at lower price post listing and can hold the equity for a long period of time for better returns.