ICICI Prudential Life Insurance’s initial public offering (IPO), worth up to Rs 6,057 crore and biggest for Indian markets in about six years, hit the primary markets on Monday. The company has fixed a price band of Rs 300-334 per share for the public offer and it will close on September 21. Not more than 50 per cent of the Issue will be allocated to qualified institutional buyers (QIBs), including 5 per cent to the MFs. Moreover, not less than 15 per cent of the Issue is available for non-institutional bidders, while the rest 35 per cent is available for the retail investors.
ICICI Prudential Life Insurance is a joint venture between ICICI Bank and UK-based Prudential Corporation. It is the largest private sector life insurer in India in terms of retail weighted received premium (RWRP). It offers a wide gamut of products and services in life insurance, health insurance and pension segments. Its market share on RWRP basis stood at 11.3 per cent (in FY16) among all insurance companies in India. Amongst 23 private sector life insurers in India, ICICI Pru Life’s market share stood at 21.9 per cent in FY16.
Brokerage firms such as Reiance Securities, Hem Securities and SPA Securities are bullish on the public offer. Reliance Securities in a research report said, “ICICI Prudential Life has delivered strong growth in total premium and new business premium in last 3 years with healthy return on equity in excess of 30 per cent. It is focusing on increasing shareholders return through sustained growth in value of new business. At higher price band of Rs 334, the issue is priced at 3.4 times price to embedded value which, in our view, is reasonable compared to recent deal of HDFC Standard Life and Max Life. We expect ICICI Prudential Life to deliver strong performance, going forward on the backdrop of lower insurance penetration in India. We recommend ‘Subscribe’ as it in our view, the issue provides healthy investment opportunity for the long-term investors.”
The insurer has allocated over 4.89 crore shares at the upper price band of Rs 334 to anchor investors from India and abroad.
Hem Securities said, “Looking after strong fundamentals, established & well known brand and strong parentage, the public offer is looking attractive destination to deploy the funds in. Hence, we recommend “Subscribe”on issue.” However, Jimeet Modi, chief executive officer at SAMCO Securities believe the valuation of ICICI Prudential Life seems slightly on the higher side compared to other listed peers.
The IPO comprises of up to 18,13,41,058 equity shares of ICICI Prudential Life, including a reservation of up to 1,81,34,105 shares for the shareholders of ICICI Bank.
SPA Securities said, “Indian life insurance sector offers strong growth opportunity considering that it is already the tenth largest life insurance market in the world despite underpenetrated insurance market with a life insurance penetration of 2.7 per cent in 2015 compared to Thailand (3.7 per cent), Japan (8.3 per cent) and South Africa (12 per cent) and global average of 3.5 per cent. We are positive on the prospects of the company given above industry growth in premiums, diverse presence across all business verticals, customer focused approach, pan India presence, strong persistency & claim settlement ratio and parentage & brand equity of the promoter. We recommend investors to ‘Subscribe’ to the issue for long term gains.