An interesting feature of the preceding financial year was the presence of a few big ticket IPOs of SBI Life Insurance, HDFC Standard Life Insurance, GIC RE and ICICI Prudential General Insurance. Global research firm Nomura has initiated coverage on the shares of three insurance companies with a buy rating on the shares.
Year 2017 was undoubtedly the year of IPOs, wherein India Inc raised more than 67,000 crore in the period through the primary markets. However, an interesting feature of the preceding financial year was the presence of a few big ticket IPOs of SBI Life Insurance, HDFC Standard Life Insurance, GIC RE and ICICI Prudential General Insurance. Interestingly, these four players collectively raised Rs 32,270 crore from the markets. In case of these issues, brokerages had a subscribe rating given the long-term prospects.
Global research firm Nomura has initiated coverage on the shares of three insurance companies with a buy rating on the shares. We take a look at what Nomura has to say about the prospects of these insurers.
HDFC Standard Life Insurance
India’s third largest private sector life insurance company, HDFC Standard Life Insurance has been one of the best performing players since its issue in November-17. The shares were trading at Rs 402 this morning. The shares have returned more than 38% as compared to its issue price of Rs 290. Nomura has a target price of Rs 430 on the shares. “HDFC Standard Life Insurance (HDFC SL) is the most profitable life insurer based on value of new business (VNB) with VNB (Value of New Business) margin at 22% in FY-17. HDFC SL enjoys a market share of 6.8% in FY17 at industry level (12.7% amongst private players) and they also have the most balanced product mix with ULIP constituting only 35% of the total NB (New Business) basis,” Prabhudas Lilladher had said in its IPO report.
SBI Life Insurance
SBI Life Insurance shares were trading at Rs 700 this morning on NSE. Interestingly, the insurance player had an issue price of Rs 700 for its IPO in September-17. Nomura has a target price of Rs 840 on the shares, implying an upside of 20% from the current market prices. Most of the brokerages had conceded that the issue is mainly for long-term investors. R Sreesankar of Prabhudas Lilladher told FE Online in September-17, “The issue is certainly not cheap. It is for the long-term investor.” Prabhudas Lilladher has a subscribe rating on the issue given the long-term prospects.
ICICI Prudential Life Insurance
Nomura says that ICICI Prudential Life Insurance remains its top pick in the insurance space. The shares were trading at Rs 388 this morning on NSE. Nomura has a target price of Rs 490 on the shares implying an upside of more than 26% from the current market prices. Interestinlgly, ICICI’s group chairman Chanda Kochhar had said during the IPO of ICICI Lombard General Insurance last year, “I really cannot comment on the returns going forward but if you go by an example, last year we did an IPO of our life insurance company and if you see the track record there so far for those investors the group has delivered a 33% annualised return just in this last year.”