HDFC Life Insurance Company IPO (initial public offering) is all set to hit the stock market on Tuesday, 7 November. HDFC Life has expected to raise up to Rs 8,695.01 crore at the upper end of the price band through its share sale in a three-day bidding process starting today, 7 November. HDFC Life is a life insurance service provider incorporated in 2000 in Mumbai. The company has set a price band of Rs 275-290 for its IPO, in which HDFC and Standard Life will offload 9.52% and 5.4% respectively. HDFC Life IPO is the first offering by HDFC group after 22 years. The public offer will remain open on 7 November and will close on 9 November. We take a look at nine key things to know about Rs 8,700 crore public offer.
HDFC Life’s public issue comprises an offer for sale of 29.98 crore shares. As per the draft papers filed for IPO, HDFC proposes to dilute about 9.55% stake nearly 19.12 crore shares while Standard Life will offload about 5.42% nearly 10.86 crore shares through the IPO. The company has reserved up to 21.44 lakh shares for its employees, up to 8.05 lakh shares for HDFC employees and up to 2.99 crore shares for HDFC shareholders. The floor price is 27.5 times the face value and the cap price is 29 times the face value. Bids can be made for a minimum of 50 equity shares and in multiples of 50 shares thereafter. The Price/Earnings ratio based on diluted EPS on a restated consolidated basis of HDFC Life for FY 2017 at the upper end of the price band is 65.91 times while the Industry average stood at 51.4 times.
HDFC Standard Life Insurance Company yesterday raised Rs 2,322 crore from anchor investors, ahead of its initial public offer beginning today for subscription. Singapore’s sovereign wealth fund Temasek, Norwegian fund Norges, Kuwait Investment, T Rowe Price, Fidelity, Blackrock and JP Morgan are among the anchor investors, according to a regulatory filing. The shares have been allocated at the upper price band of Rs 290 apiece. The company’s executive committee and the promoter selling shareholders in consultation with the manager to the offer have finalised allocation of 80,068,600 shares to anchor investors, the filing submitted to the NSE said.
The global coordinators and book running lead managers of the IPO of HDFC Life Insurance Company are Morgan Stanley India Company, HDFC Bank, Credit Suisse Securities (India), CLSA India and Nomura Financial Advisory and Securities (India). The book running lead managers are Edelweiss Financial Services, Haitong Securities India, IDFC Bank, IIFL Holdings and UBS Securities India while Karvy Computershare Private Limited is the registrar to the issue.
As the public offer of HDFC Life comprises a 100% offer for sale, the company won’t be receiving any proceeds from the issue. “The funds raised will be used by HDFC Ltd for its business purposes as the insurance arm has the adequate capital needed for growth,” PTI quoted HDFC Chairman Deepak Parekh as saying. Currently, HDFC owns 61.21% stake in the joint venture which will come down to 51.69% while Standard life’s 34.75% will come down to 29.35% post issue.
HDFC Life has reported a rise of 9% in the restated standalone net profit to Rs 892.13 crore for the financial year ended 31 March 2017 as compared to Rs 818.4 crore for the FY 2015-2016. For FY 2017, HDFC Life had a gross premium income of Rs 19,445 crore, while total income stood at Rs 22,189 crore. HDFC Life has reported a restated standalone net profit of Rs 554.85 crore for the six-month period of the current financial year 2017-2018.
HDFC Life is a joint venture between HDFC and Standard Life Aberdeen plc. HDFC is one of the leading financial service providers in India offering finance for housing, banking, life and general insurance, asset management and education loans. The company has a pan-India presence, comprising 414 branches across India as of 30 September supported by a workforce of 16,544 full-time employees.
HDFC Life offers life insurance products through diversified distribution network which comprises four distribution channels, namely bancassurance, individual agents, direct, and brokers and others. However, bancassurance remains the company’s most significant distribution channel, generating 53.5% and 50.7% of the total new business premium for the financial year 2015-16 and 2016-17, respectively. While, individual agent network generated 7.6% and 7.5% of their total new business premium for the financial year 2015-16 and 2016-17, respectively. As at June 30, HDFC Life had 58,147 individual agents (which comprise 6.1% of the all private agents in the Indian life insurance industry) who exclusively sell their life insurance products across our branches.
Insurance IPOs in 2017 so far
There are four insurance companies which have gone public in 2017 so far, namely GIC of India, SBI Life Insurance Company, ICICI Lombard General Insurance Company and New India Assurance. Collectively these four companies have raised about Rs 35,000 crore from the capital markets out of Rs 57,000 crore (approx) raised in 2017 so far.
Concerns on IPO
Earlier in June 2016, the three-way merger between HDFC Life, Max Life, and Max Financial was proposed but had been called off in July 2017. However, the merger proposal was rejected by the regulator, Insurance Regulatory Development Authority of India (IRDAI) on the grounds that an insurance company cannot merge with a non-insurance company.