Reblog: ICICI Prudential Life Insurance IPO review


The article is authored by Dilip Davda, a SEBI registered Research Analyst and can be found here.

Issue Summary

ICICI Prudential Life Insurance Co. Ltd. (IPLICL) is the largest private sector life insurer in India by total premium in fiscal 2016 and assets under management at March 31, 2016. It is a joint venture between ICICI Bank Limited, India’s largest private sector bank in terms of total assets with an asset base of 7.2 trillion at March 31, 2016, and Prudential Corporation Holdings Limited, a part of the Prudential Group, an international financial services group with GBP 509 billion of assets under management at December 31, 2015. IPLICL is one of the first private sector life insurance companies in India and commenced operations in fiscal 2001. It offers a range of life insurance, health insurance and pension products and services. Every fiscal year since fiscal 2002, it has consistently generated the most new business premiums on a retail weighted received premium basis among all private sector life insurers in India.

The Indian life insurance sector was the tenth largest life insurance market in the world and the fifth largest in Asia in terms of total premiums in 2016. The Indian economy is one of the fastest growing large economies in the world, with a GDP growth rate of 7.3% (in real terms) in fiscal 2016 and a household savings rate of 19.1% of GDP in fiscal 2015, according to CRISIL Research. IPLICL expects these macroeconomic factors, coupled with India’s large and young population, rapid urbanization and rising affluence to propel the growth of the Indian life insurance sector.

In fiscal 2016, its market share, on a retail weighted received premium basis, among all insurance companies in India (public and private sector) was 11.3%, as compared with a market share of 9.7% for nearest private sector competitor. Among the 23 private sector life insurance companies in India, it had a market share, on retail weighted received premium basis, of 21.9% in fiscal 2016. For the three months ended June 30, 2016, its market share, on a retail weighted received premium basis, among all insurance companies in India and among private sector life insurance companies in India was 11.2% and 23.3%, respectively.

A customer-centric culture that spans all aspects of its business is a key element and it offers a range of products to cater to the specific needs of customers in different life stages, enabling them to meet their long-term savings and protection needs. IPLICL offers its customers access to company’s products and services through an extensive multi-channel sales network across India, including through the branches of bank partners, individual agents, corporate agents, employees, offices and website. As of June 30, 2016, it had 124,155 individual agents. As of July 12, 2016, its bank partners had over 4,500 branches.

For listing benefits the company is coming out with a maiden IPO of 181,341,058 equity share of Rs. 10 each as offer for sale via book building route with a price band of Rs. 300-334. Because of wide gap in price band, the company will raise Rs. 5,440.23 – 6,056.79 crore based on lower and upper price bands. Entire offer for sale is being made by ICICI Bank Ltd, whose acquisition cost per share is Rs. 36.19 per share. Issue opens for subscription on 19.09.16 and will close on 21.09.16. Minimum application is to be made for 44 shares and in multiples thereon, thereafter. It has reserved 10% of the issue for shareholders of ICICI Bank Ltd. BRLMs to the offer are DSP Merrill Lynch Ltd (BofA Merrill Lynch)., ICICI Securities Ltd., CLSA India Pvt Ltd., Deutsche Equities India Pvt Ltd., Edelweiss Financial Services Ltd., HSBC Securities and Capital Markets (India) Pvt Ltd., IIFL Holdings Ltd., JM Financial Institutional Securities Ltd., SBI Capital Markets Ltd., UBS Securities India Pvt Ltd. Karvy Computershare Pvt Ltd is the registrar to the issue. Post allotment, shares will be listed on BSE and NSE. From inception till December 2005 it issues all shares at par. Thereafter, till 2010 March it issued further equity in a price range of Rs. 30 to Rs. 400 per share. Being offer for sale, it’s paid up equity remains at Rs. 1435.32 crore post issue.

On performance front, for last three fiscals, it has posted an average EPS of Rs. 11.40 (on consolidated basis). First quarter of current fiscal is showing dismal performance, but insurance industry normally generates maximum business in the second half of the year. Hence the attribution on the basis of first quarter will be misguiding.

On listing plans, ICICI Bank has diluted around 6 per cent before IPO and through IPO now it is diluting another 12.63 per cent stake. Post IPO ICICI Bank will hold around 55 per cent, Prudential group 26 per cent and the rest will be public holding. As it needs to dilute another 6 per cent in next three years, the existing stakeholders have planned to have ICICI Bank holding around 54 per cent and Prudential group at 20%, thus the next dilution will be by way of offerings from Prudential group.

On GCBRLM and BRLM’s front, they have handled 30 issues in past three years out of which 8 issues closed below the issue price on the listing date.

This being the first mover IPO from the private sector life insurance company, it is expected to generate fancy in coming months and on expectations of the same, the pricing appears to be on the higher side. Its response and performance post listing will open the Pandora’s Box with many more issues from the insurance sector. Hence it will be very interesting to keep a watch on this IPO and its listing performance.

Conclusion: Minimum lot may be considered for longterm investment for this first mover IPO of the life insurance sector.

IPO Review Author

DISCLAIMER: No financial information whatsoever published anywhere here should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is purely for educational and information purposes only and under no circumstances should be used for making investment decisions. Readers must consult a qualified financial advisor prior to making any actual investment decisions, based on information published here. As SME issues have entry barriers and low preference from broking community, any reader taking decisions based on any information published here does so entirely at own risk. Above information is based on information available as on date coupled with market perceptions. Author has no plans to invest in this offer.

(SEBI registered Research Analyst-Mumbai).

About the author, Dilip Davda

Dilip Davda (SEBI registered Research Analyst-Mumbai), a freelance journalist for more than 25 years, is a stock market analyst and news article writer. Since 1985, he has contributed to print media, electronic media and often appears on TV channels as visiting stock analyst. His articles are regularly published in Corporate India, Smart Investment (English and Gujarati weekly published from Ahmedabad), Free Press Journal and many other news papers & magazines. He is also a visiting stock analyst on DD News TV Channel.


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