The IPO (initial public offering) of New India Assurance is about to open on Wednesday, 1 November. India’s largest general insurance company New India Assurance (NIA) has expected to raise about Rs 9,600 crore at the upper end of the price band. With such a huge IPO size, NIA public offer will be among India’s top five share sales. The issue comes soon after the IPOs of General Insurance Corporation, SBI Life Insurance, ICICI Lombard General Insurance. Collectively these three IPOs alone have raised about Rs 25,470 crore out of Rs 50,000 crore total money raised through public issues in 2017 so far. We take a look at five key things to know about Rs 9,600 crore public offer of New India Assurance.

IPO details

The company has set a price band of Rs 770-800 per equity share of face value of Rs 5 each. New India Assurance is offering 12 crore equity shares out of which there is a fresh issue of 2.4 crore shares and remaining 9.6 crore shares will be sold by the government through offer for sale route. The floor price is 154 times the face value of the shares and the cap price is 160 times the face value of the equity shares. The bids can be made for a minimum of 18 equity shares and in multiples of 18 equity shares thereafter. The company has offered a retail discount and an employee discount of Rs 30 per equity share on offer price. The total offer of 12 crore shares, including the portion reserved for employees, constitutes about 14.56% of the company’s post-issue share capital.

The company has a P/E multiple of 78.05 times at the upper end of the price band based on EPS (earnings per share) calculated for the year ended 31 March 2017 on a standalone basis, and is at 74.63 times on a consolidated basis. The P/E of NIA is relatively much higher than recently listed general insurer ICICI Lombard which had it at 47.45 times. Kotak Mahindra Capital Company, Axis Capital, IDFC Bank, Nomura Financial Advisory and Securities and YES Securities (India) will be the book running lead managers while Link Intime India is the registrar to the offer.

IPO proceeds

The government of India is entitled to receive the proceeds of the offer for sale. The company won’t be getting any proceeds from the through it. However, the company has proposed to utilise the proceeds from the fresh issue towards meeting future capital requirements which are expected to arise from the growth and expansion of business, which will result in improvement of solvency margin and consequently the solvency ratio. “The Net Proceeds are currently expected to be deployed in Fiscal 2018,” company said in DRHP.

Company profile

New India Assurance was incorporated on 23 July 1919 at Mumbai. NIA is the oldest (in operation since about a century) and largest general insurance company in India in terms of net worth and net profit. The company was nationalised by the government of India on 1 January 1974. The President of India is the promoter of the company and holds 100% of the pre-offer paid-up equity share capital through Ministry of Finance. According to Crisil report, the company has the largest market share of domestic gross direct premium among general insurers in India.

Business profile

The company offers insurance products broadly categorized in verticals such as fire insurance; marine insurance, motor insurance, crop insurance, health insurance and other insurance products. The company has a multi-channel distribution network that includes individual and corporate agents, brokers, bancassurance partners and other intermediaries, as well as direct sales and sales through online channels. “As of 30 June 2017, our distribution network in India included 68,389 individual agents and 16 corporate agents, bancassurance arrangements with 25 banks in India, and a large number of OEM and automotive dealer arrangements through our agent and broker network,” company said in DRHP.

Financials

New India Assurance reported a drop of 9.73% in the consolidated net profit to Rs 839.86 crore for the financial year ended 31 March 2017. The company posted a consolidated net profit of Rs 930.35 crore in the previous fiscal. As on 31 March 2017, the company has total assets worth Rs 36,566.82 crore.

(First published on October 31, 2017, on http://www.financialexpress.com)