Brokerage firm Geojit BNP Paribas Financial Services has given ‘Subscribe’ rating to ICICI Prudential Life Insurance initial public offering which hit the primary markets on Friday. Till 2.30 pm, the public offer was subscribed 11 per cent. The issue received bids for 1,45,72,448 shares against 13,23,78,973 shares offered by the company. According to the brokerage house, the untapped opportunity and penetration in life insurance provides ample scope for the company to grow its portfolio at a rapid pace. ICICI Pru Life had an embedded value (EV) of Rs 13,940 crore as of FY16 with RoEV of 15.3 per cent. (EV is a common valuation measure in the insurance industry which measures potential future profits from existing business.)
The company has fixed a price band of Rs 330-334 for the ongoing public offer and the issue will close on September 21. Geojit BNP Paribas believes that the IPO is priced at 3.4 times FY16 P/EV at the upper price band which is favourable as compared to the valuation of recent insurance deal between HDFC Life and Max Life.
“The transaction valued HDFC Life at 4.5 times FY16 P/EV and Max Life at 3.7 times. Hence, we believe that valuation is reasonable and we recommend ‘Subscribe’ to the issue, with a medium-to-long term perspective,” the brokerage house said in a research note.
The company had allocated over 4.89 crore shares at Rs 334, the top-end of the price band, aggregating Rs 1,635.33 crore to anchor investors from India and abroad. ICICI Prudential Life Insurance Company is a joint venture between ICICI Bank and UK’s Prudential Corporation Holdings. Singapore’s Temasek and PremjiInvest also are shareholders. Shares of ICICI Bank closed 1.61 per cent up at Rs 271.85 on Monday.