GIC Re IPO opens: Most brokerages say go for it!

The Rs 11,370-crore initial public offer of General Insurance Corporation of India ( GIC Re), the country's third largest initial public offer ( IPO) of all time -is set to open for subscription on Wednesday.

Brokerages across the board have recommended subscribing to the IPO, citing the company's dominant market position, franchise strength and reasonable valuations. Here's what brokerages are saying about the IPO:

Angel Broking
Recommendation: SUBSCRIBE
The retail brokerage said the financials of GIC may get affected adversely if India witnesses bad monsoon or successive poor monsoon seasons or any other events impacting the Indian agriculture industry.

However, it has recommended subscribing to the IPO citing GIC's leadership position, well-managed investment book, robust balance sheet and reasonable valuations.

IIFL Wealth
Recommendation: SUBSCRIBE
The wealth firm recommended a 'subscribe' to the issue, saying that GIC is a unique investment option with a dominant market position and a strong franchise. IIFL Wealth said it expects gross premium for GIC to remain sturdy in the coming years.

The stock is reasonably valued at 3.6-times price to book value on a post money basis, said IIFL Wealth.

Prabhudas Lilladher
Recommendation: SUBSCRIBE
The price band implies a valuation of 25.77.4 times on March 2017 earnings per share, which is fairly priced, said Prabhudas Lilladher. The brokerage recommends subscribing to the issue for long term gains given its strong payout ratio.

The brokerage expects GIC's return on equity to remain in the range of 15-18 per cent on high investment income and better operating efficiency.

Reliance Securities
Recommendation: SUBSCRIBE
Reliance Securities expects GIC's business to get further traction owing to increasing awareness about Fasal Bima Yojana among farmers given that this segment has been growing rapidly.

The valuations are reasonable at 4 times price to book based on 2016-17 financial year earnings compared to ICICI Lombard which trades at a price to book ratio of 8.1 times, the brokerage said.

Sushil Finance
Recommendation: SUBSCRIBE
GIC has the lowest net expense ratio of 18.53 per cent compared to global peers, said Sushil Finance in its pre-IPO note. The brokerage recommends subscribing to the issue and staying invested for the medium to long term due to GIC's dominant position and positive outlook for the growth of the reinsurance sector in India.