Retail Dilemma on Application Size: ICICI Pru Life IPO

icici-pru2ICICI Prudential Life Insurance IPO is the biggest to hit the markets in last 6 years. What are the chances  ICICI Prudential Life Insurance IPO  retail portion will  get oversubscribed?  and  Should retail investors put application for minimum lot of 44 shares or for more?

Should ICICI Bank shareholders put large application to the extent that he cannot participate in retail ?   (To be updated today evening based on subscription Data)

After Issue closure for QIB HNI shareholders  at 5:00 pm


ICICI Prudential Life Insurance IPO: Retail will get full allotment of minimum 44 shares as application wise issue is only .8x subscribed & not likely to reach full subscription application wise. IPO gets good response more than 10X. surprise is shareholders category.  Those who have put in larger application than a lot are likely to get more shares. Meanwhile even as ICICI Prudential Life Insurance IPO got good overall subscription, its GMP (grey market premium tumbled) to around Rs. 10/-

IMPORTANT : ICICI Prudential Life Insurance IPO is likely to witness electric action in next few hours from HNIs & QIB . Will be subscribed many times. Retail if not applied may join  as at some brokers the bidding goes till late night. 

Given the wide publicity to the issue and coming from ICICI, we may assume it will be able to attract 15-20% new or dormant investors.We take a look at some recent IPOs from point of retail & try to estimate if ICICI Prudential Life Insurance will be able to attract the required number of retail investors. So far the highest number of applications which also means unique number of applicants for an IPO is for L&T infotech IPO even though it was not commanding a good premium in the grey market.  RBL Bank numbers were only a shade lower.

ICICI Bank also has some 10 Lakh individual shareholders and quite likely 40-50% of these also apply for their shareholders quota and at least half of them could also apply for retail quota. This further means about 2-3 Lakh more applicants in retail.However many some of these may be already active investors and so this additional number could go down. This number also depends on overall sentiment which seems to have got affected as there are few buyers of ICICI pru ife in the grey market at end of 2nd day..

Thus with a 10-20% increase over L&T Infotech IPO and further boost of 1-2 Lakhs from ICICI shareholders, the issue could garner about 11-14 Lakh applicants. Plus or minus to this is largely dependent on tomorrows market conditions as well as results of Fed meeting and BOJ meeting may become clear by that time. A possible scenario which has been scaled down fro earlier expectations factoring in grey marker rates and low subscription on day 2 is given below :

IPO Total
Issue Size in cr Retail: no. of shares Retail: Issue Size in  cr Retail: Total applications Retail: Appl wise  x Times Retail: shares applied Retail: Amount in cr. Retail: Overall Times
13,23,78,973 4,421 57122434 1907.89 12,50,000 .96
RBL 5,39,09,628 1,213 18868370 424.54 10,35,864 3.57 104795665 2357.9 5.55
L&T Infotech 1,75,00,000 1,243 6125000 434.88 10,52,374 3.44 4,36,39,240 3098.39 7.12
Adv Enzymes 45,94,875 412 15,99,565 143.32 7,83,490 7.84 1,81,65,376 1627.62 11.36

The issue is expected to get subscribed at even 11 Lakh applicants if market holds on as many applicants may apply more than one lot. Thus the chances of issue not getting subscribed are not high provided there is not a heavy downturn in the market.  The falling grey market rates could turn some investors off.

CAUTION & Important Comments:  As stock markets turned cautious today ahead of the big event tomorrow, the grey market buyers at GMP / Kostak seems to have vanished. The issue is said to have gathered about 5 lakh applications from retail today till 6 pm & subscription levels are about 65% for retail & .52X overall which appear to be on the lower side. There is little doubt that the IPO has been priced 10-20 Rs. more by management to extract mileage from market conditions and also influence by high valuation of HDFC Life- Max deal and this poses a risk to those looking purely for listing gains.  A good amount of interest should come from QIBs tomorrow towards the end & hopefully HNI’s too. While bidding for IPO at brokers could well extend upto midnight seeing the Issue size, ICICI shareholders bidding could close by 4 p.m. The Lead managers should  have learnt a lesson from Yes bank fiasco.  In place of keeping a lower rate, they reacted instead by keeping a wide price band (300-334). Possibility of issue not sailing through looks less but any such fear could rattle the investors and market as well. 

Whether Investors should apply for one lot or more. The IPO needs about 13 lakh applicants to get it subscribed to the extent that in that situations investors will get get only one lot even if they had put in a larger application.  My estimate is that ICICI Prudential Life Insurance IPO shall be able to come near to this figure due to factors mentioned above and its overall long term good prospects and being first insurance sector issue. However todays subscription levels & vanishing of grey market premium raise enough doubts. Hence in any situation it may not pay for investors in retail to put large application and they can stick to minimum lot.

Related Links :  1. For ICICI Bank Shareholders applying in ICICI Pru IPO :

  1. ICICI  Prudential Life Insurance : Consolidated views of brokers / Analysts on ICICI Prudential Life Insurance IPO

3. ICICI Prudential Life Insurance: Detailed IPO  Analysis

Standard disclaimer:  I am not a SEBI registered analyst. I may have vested interest in every stock I discuss. Please do your own due diligences as stock market investments have high degree of inherent risk.



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