What's Driving Niva Bupa Health Insurance Share Price Surge

There is a lot riding on the expectation of reduced Goods and Services Tax on life and health insurance premiums, which today attract 18% rate. But that is just one of the factors that is influencing the share price of Niva Bupa Health Insurance Ltd., which listed on the stock markets on Nov. 14. The stock has run-up over 30% this week, triggered by reports of GST tax rate reduction.

The sudden spike in stock price is a result of institutional demand and low liquidity in shares and expected GST rate cut.

Niva Bupa shares were locked in 20% upper circuit on the back of low delivery volumes. The combined delivery percent of both the NSE and BSE stood at 15.20% on Wednesday, with delivery turnover not more than Rs 67 crore. The low liquidity and demand pushed the stock price higher in the market.

Niva Bupa Health Insurance came out with a Rs 13,520-crore IPO comprising of Rs 800 crore of fresh issue and Rs 1,400 crore of offer for sale. The issue was subscribed 1.52-times at close.

Of the 16.27% equity that was part of the issue, 7.32% equity is anchor lock-in, while 8.95% equity is free to trade, as per stock exchanges. In addition, 5.3% employee stock option shares are also free to be traded, as per the exchange notification.

Over 6.68 crore equity shares allocated to anchor investors are locked-in for 30 days up to Dec. 11 and another 6.68 crore equity shares are locked-in for 90 days, up to Feb. 9, 2025.

The non-institution free shares, including ESOP shares, is at 9.60%. Excluding the ESOP shares, the liquidity available is just around 4% held by the retail investors and HNIs.

Niva Bupa has a sectoral foreign cap of 74% and had utilised 67% of this at the time of listing, including 55.98% held by the parent Bupa Investments Overseas Ltd. The headroom for foreign investors is limited to just 4% before it enters the Red Flag list, which requires prior permission before investing.