ICICI Lombard Rs. 5700 crore IPO Opens Today- Should You Subscribe?

Company & Issue details :

This is completely an offer for sale with no issuance of fresh shares and largely involves share sale by Fairfax and ICICI Bank.

The issue opens on September 15 and closes on September 19. The sale of 86.24 million shares values the firm at Rs30,000 crore. Price band of the issue is Rs. 651-Rs. 661.

Financials & Valuation:

The company is said to post an ROE of 18-20% in line with the operating efficiency as well as investment income.On the valuation front, it is quite expanded but goes well with the huge growth potential that the sector offers. So all in all, analyst and brokerage houses have given thumbs up to the issue with a long-term perspective. "We are positive on ICICIL (ICICI Lombard) for long term as non-life Insurance sector in India provide huge opportunities for growth due to significantly lower penetration and lower insurance density compared to other developed and emerging economies," Motilal Oswal Securities Ltd said in a note.

The valuation of Rs. 651- Rs 661 is elevated and is 45.8 to 46.5 times on March 2017 EPS basis. To be honest, the issue will get a decent response, only because markets are at their peaks and investors and mutual funds are flush with funds. The timing of the issue is perfect.

Conclusion :

With steep valuations in comparison to other listed peers on the exchange, huge listing gains are not expected from the issue. But seeing the robust growth potential the company has in the sector, analysts are giving it a Subscribe rating on long-term perspective basis. Liquidity is what will drive the subscription.

Disclaimer

This article is strictly for informational purposes only. It is not a solicitation to buy, sell in securities or other financial instruments. Greynium Information Technologies Pvt Ltd, its subsidiaries, associates and the author of this article do not accept culpability for losses and/or damages arising based on information in this article.