Shares of The New India Assurance Co. Ltd (NIA) debuted 10% lower on the bourses on Monday, after the general insurer saw its Rs9,600 crore initial public offer (IPO) get subscribed 1.19 times earlier this month.
NIA shares opened 6.39% lower on the BSE at Rs748.90 apiece, compared to the issue price of Rs800, which was the upper end of the price band of Rs770-800 per share. The stock touched a high and a low of Rs749 and Rs717.75, respectively.
At 10.05am, the scrip was trading at Rs718 on the BSE, down 10.25% from its issue price. India’s benchmark Sensex index fell 0.17% to 33,259.34 points.
Many analysts had recommended that investors avoid NIA’s IPO as they questioned the steep valuation of the stock given the relatively lower returns the general insurer offers, Mint reported.
According to the company’s red herring prospectus filed with the markets regulator, NIA’s return on equity (RoE) stood at 8.6% for fiscal year 2016-17, compared to private peers ICICI Lombard General Insurance Co. Ltd and Bajaj Allianz General Insurance’s 20.3% and 23.1%, respectively.
It reported operating profit for only one out of five fiscal years to 2017. For fiscal years 2016 and 2017, the company reported an operating loss of Rs877.65 crore and Rs486.03 crore, respectively.
Incorporated in 1919, NIA offers insurance products in key business verticals such as fire insurance, marine insurance, motor insurance, crop insurance and health insurance.