India’s resurgent IPO market banks on insurance
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India’s resurgent IPO market banks on insurance

ICICI Prudential Life reinvigorates IPOs; slew of smaller listings ready to follow.

After several lean years, during which activity all but petered out, India’s equity capital markets are finally back in action. On September 22, ICICI Prudential Life Insurance, a joint venture between India’s ICICI Bank and UK insurer Prudential, closed the books on its Mumbai initial public offering. 

Barring a last-minute catastrophe, the sale looked set to be a big hit. Investors placed orders for 1.38 billion shares, or more than 10 times the 132.4 million securities on offer. If completed, it will mark the first primary stock offering by an Indian insurer and the largest onshore IPO since Coal India’s $3.46 billion sale in late 2010. ICICI Prudential’s institutional investor category was 11.83 times oversubscribed, while the class of shares set aside for high net-worth individuals was 28.55 times oversubscribed.



A flurry of other initial stock sales are set to hit the markets in the months ahead. Sheela Foam, makers of Sleepwell mattresses, filed draft papers with the Securities and Exchange Board of India in the first week of August. It hopes to sell a 15% stake, valuing the New Delhi-based firm at more than $500 million, and raising $80 million. Edelweiss Financial Services, ICICI Securities and IIFL are underwriting the sale. 

Aster DM Healthcare, which runs hospitals across India, Asia and the Middle East, is hoping to complete its $300 million initial stock sale in the final quarter. Varun Beverages, which bottles soft drinks in South Asia for PepsiCo, is hoping to raise $150 million by early 2017. 

Overall, India’s primary equity capital markets are set for their best year since 2010. In the current year to September 22, a total of 62 IPOs worth $2.9 billion were completed in Mumbai, against 51 IPOs worth $1.03 billion in the same period a year ago, and just $716 million over the course of the three years to end-2014, according to data from Dealogic.

A few sales are also likely to filter through from financial services. PNB Housing Finance, a division of state-run Punjab National Bank, hopes to complete its $375 million stock offering in December. And if ICICI Prudential performs well in the aftermarket, bankers expect to see a steady flow of share sales by India’s biggest insurers. 

Up first, but not before April 2017, is likely to be SBI Life Insurance, a joint venture between State Bank of India and BNP Paribas Cardif, which will look to raise no less than $1 billion. Then there are the nation’s two main bourses, the Bombay Stock Exchange and National Stock Exchange, both hoping to raise upward of $150 million from their listings in December 2016 and early 2017, respectively. 


“You’re looking at a market where most of the fundamentals are

in place – you have a strong economy and a definite appetite for

Indian equities”

Vikas Khemani, Edelweiss

Vikas Khemani, president and chief executive at Mumbai-based Edelweiss, points to a host of factors driving the resurgence in ECM activity. 

“You’re looking at a market where most of the fundamentals are in place: you have a strong economy and a definite appetite for Indian equities,” he says. 

“In turn, there’s plenty of supply flooding in to match demand, from corporates across multiple industries looking for fresh growth capital, to private equity firms, many of whom have been waiting for several years for the right market conditions in order to exit long-standing investments."

A case in point is seven-year-old buyout firm Faering Capital, founded by HDFC chairman Deepak Parekh’s son Aditya, whose stake in privately owned RBL Bank was valued at $40 million during the Maharashtra lender’s $180 million August listing.

A rosy future of India’s equity capital markets is not assured.

India’s resource-scarce economy may well be set to continue to grow with vigour, benefiting from a pro-business government, rising consumption rates and the low price of oil. The International Monetary Fund tips gross domestic product to come in at 7.4% in both 2016 and 2017. 

Yet big or breakthrough stock sales like ICICI Prudential’s aren’t always an automatic harbinger of better times. Coal India’s sale dragged in $52.5 billion in orders from around the world, yet presaged a long decline in onshore equity prices. Reliance Power’s January 2008 IPO secured orders worth $27.5 billion but killed the market stone dead for more than a year. 

And for those naturally inclined toward caution and wary of frothy talk of bull markets, it’s worth taking a glance in the direction of India’s fifth largest private lender by assets, Yes Bank, which in early September shelved a $1 billion qualified institutional placement, blaming trading volatility. 

Yes Bank CEO Rana Kapoor pledged to complete the share sale, aimed at institutional investors, before March 2017.