Mumbai: Individual investors are generally not known for being astute in equity investing, but they got it right in the recent initial public offerings of insurance companies. These investors stayed away from share sales by these companies, which have listed on a weak note on the stock exchanges due to low appetite for these stocks at current valuations, considered rich.

Out of the four large insurers, which got listed in the last couple of months, SBI Life Insurance and GIC are trading below their issue prices. ICICI Lombard is trading 2% above the offer price, while New India Assurance, which will list soon, is expected to witness a weak debut.

All four of them had together raised Rs 35,000 crore. Bankers said these issues sailed through thanks to the demand from institutional investors, mainly LIC. The portions reserved for retail and wealth investors for all four insurance IPOs were under-subscribed.

Analysts said expensive valuations and lack of knowledge about the insurance business resulted in lacklustre demand from domestic individual investors.

"The reason for the poor response from retail and HNIs (high networth investors) could be because of the complex nature of insurance business and their expensive valuations," said Raamdeo Agrawal, joint managing director, Motilal Oswal Financial Services.

The portion set aside for HNIs in the Rs 9,600-crore New India Assurance was subscribed 12% while retail investors' portion was subscribed 11%. The retail and HNI portions of General Insurance Corporation was subscribed 0.6 times and 0.22 times, respectively. In the SBI Life IPO, retail and HNI segments were subscribed 0.8 times and 0.64 times, respectively.

Bankers said non-banking finance companies, which fund IPO purchases, were unwilling to fund clients. "IPO financing was not available for these insurance IPOs because of their large size and investors did not know how to value the insurance sector as they are new to the IPO market," said V Jayashankar, senior executive director, Kotak Investment Banking. "Also, sentiment was impacted due to the poor listing of ICICI Lombard followed by SBI Life."

ICICI Prudential Life, the first company in the sector to list in September 2016, is trading at a 16% premium above its issue price.

The stock had fallen 18% in first two months of its listing last year.

"General insurance companies are not making operating profits yet in India and their profits come from investment income," said Vidhi Shah, analyst, Prabhudas Lilladher. "At this environment, asking for a valuation of over 40 PE is not justified."