Reblog: ICICI Lombard IPO review




ICICI Lombard General Insurance Co. Ltd. (ILGI) is a general insurance arm of ICICI Bank group. The Bank is in the process of unlocking value of its arms via public issues and listings. Last year the group came with first life insurance sector arm ICICI Prudential Life Insurance IPO that after initial hiccups surged and continues to do well. Now it is coming out with a maiden offer for its general insurance arm which is ranking first among private sector general insurance companies with better product mix and having better business on all fronts.

ILGI is the largest private-sector non-life insurer in India based on gross direct premium income in fiscal 2017, a position it has maintained since fiscal 2004 after being one of the first few private-sector companies to commence operations in the sector in fiscal 2002. The company offers its customers a comprehensive and well-diversified range of products, including motor, health, crop/weather, fire, personal accident, marine, engineering and liability insurance, through multiple distribution channels. It was founded as a joint venture between ICICI Bank Limited, India’s largest private -sector bank in terms of consolidated total assets with and Fairfax Financial Holdings Limited, a Canadian based holding company which, through its subsidiaries, is engaged in property and casualty insurance and reinsurance and investment management.

The Indian economy is one of the fastest growing large economies in the world, with its gross domestic product growing at a cumulative annual growth rate of 7.25% (in real terms) from fiscal 2013 to fiscal 2017, while the Indian non-life insurance industry, based on gross direct premium income, grew at a cumulative annual growth rate of 16.6% during the same period. The Indian non-life insurance industry was the 15th largest non-life insurance market in the world and the fourth largest in Asia in terms of gross direct premium income in the year ended December 31, 2016.

ILGI is coming out with its maiden IPO via the secondary route through book building process. It is offering 86247187 equity share of Rs. 10 each in a price band of Rs. 651 to Rs. 661 to mobilize Rs. 5614.69 to Rs. 5700.94 crores (on the basis of lower and upper price bands). The issue opens for subscription on 15.09.17 and will close on 19.09.17. Minimum application is to be made for 22 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE and NSE. This being a secondary offer, its paid up capital post issue will remain same at Rs. 453.95 crores. The issue constituted 19% of fully diluted post issue paid up equity capital of the company. The issue has a reservation of 4312359 equity shares for its retail and HUF stakeholders, from the balance 50% for QIBs, 15% for HNIs and 35% for retail category. GCBRLMs to this offer are BofA Merrill Lynch (i.e. DSL Merrill Lynch Ltd.), ICICI Securities Ltd. and IIFL Holdings Ltd., while BRLMs are Citic CLSA Securities (i.e. CLSA India Pvt. Ltd.), Edelweiss Financial Services Ltd. and JM Financial Institutional Securities Ltd. Karvy Computershare Pvt. Ltd. is the registrar to the issue.

On the performance front, ILGI has posted total revenues/net profits of Rs. 5028.41 cr. / Rs. 520.07 cr. (FY14), Rs. 5044.81 cr. / Rs. 585.32 cr. (FY15), Rs. 5804.25 cr. / Rs. 505.34 cr. (FY16) and Rs. 7180.49 cr. / Rs. 641.82 cr. (FY17). For first quarter ended on 30.06.17 of the current fiscal, it has earned net profits of Rs. 214.34 crore on total revenues of Rs. 1881.88 crore. If we annualize the latest working and attribute it on post issue equity then asking price is at a P/E of around 35 and at a P/BV of 7.6. Last three fiscal’s average RoNW is 18.42%. It has no listed peers to compare with. The average cost of acquisition by ICICI Bank and FAL, the selling stakeholders is Rs. 43.62 and Rs. 137.97 per share respectively.

On BRLMs front, 6 merchant bankers associated with the offer have handled 42 public issues in the past three years out of which 11 issues closed below the issue price on the listing date.

Conclusion: ILGI is set to gain first mover fancy in the sector post listing as many more companies in this segment are lining up for maiden offers going forward. The issue appears to be fully priced. Future for this segment is bright. Considering all these aspects, investment for the long term may be considered.

The review is penned by Dilip Davda and appears on It can be accessed using this link.

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