ICICI Prudential Life Insurance to launch IPO by September

Mumbai: ICICI Prudential Life Insurance Co. Ltd is likely to launch its ₹ 6,000 crore initial public offering (IPO) by September, according to two people aware of the development.

The IPO will be the first public offering of a life insurer in India.

ICICI Prudential Life Insurance is a joint venture of India’s largest private sector lender ICICI Bank Ltd and Prudential Corporation Holdings Ltd. The company began operations in 2000.

ICICI Prudential will be filing its draft share sale documents before the end of July, said one of the two people cited above, requesting anonymity as he is not authorized to speak with reporters.

“Work on the documentation is going on in full swing. Insurance is a well-regulated business and the company has two major financial services companies as sponsors, so the level of corporate governance and reporting standards are high, and that makes the documentation work easier. Also, given that ICICI Prudential is looking at a launch timeline of September, it is imperative that the document gets filed as early as possible,” this person said.

The company has hired ICICI Securities Ltd and Bank of America Merrill Lynch to manage the share sale.

Bank of America Merrill Lynch declined to comment on the development.

“Board of directors of ICICI Bank in April 2016 approved the sale of a part of its shareholding in ICICI Life through an IPO by the company, subject to market conditions and necessary approvals. The size and other details of the offer would be determined in due course,” said an ICICI Bank spokesperson, in response to emailed queries.

Emails sent to ICICI Prudential Life and ICICI Securities Ltd remained unswered.

ICICI Bank’s board had on 29 Apirl approved the sale of a part of its stake in ICICI Prudential Life Insurance.

“ICICI Bank will dilute its shareholding in the IPO, but it will continue to hold a controlling stake in the company. The firm is seeking a valuation of over ₹ 40,000 crore for the business,” the first person said.

ICICI Prudential is not looking at divesting its stake, said the second person cited above, also requesting anonymity.

As of 31 March, ICICI Bank held 67.6% stake in the life insurance firm, while its foreign partner Prudential held 25.9%, according to the company’s latest annual report.

In December, ICICI Bank sold 6% stake in the life insurance company in a transaction that valued the insurer at ₹ 32,500 crore. Of this, 4% was acquired by billionaire Azim Premji’s PremjiInvest and its affiliates.

The remaining 2% was bought by Compassvale Investments Pte Ltd, a wholly-owned subsidiary of Singapore-based investment firm Temasek Holdings Pvt. Ltd.

The deal was valued about ₹ 1,950 crore.

Other insurance firms have also expressed their intention to go public.

In May, Business Standard reported that SBI Life Insurance, a joint venture of the State Bank of India and BNP Paribas Cardiff, is likely to sell shares to the public. On 20 April, the board of Housing Development Finance Corp. Ltd (HDFC) approved a proposal to sell around 10% in HDFC Standard Life Insurance Co. to the public.

On 18 June, HDFC Standard Life, Max Financial Services Ltd and its unit Max Life Insurance Co. Ltd announced merger talks that may lead to the creation of an insurance firm with ₹ 1.1 trillion in assets. The merger will eventually result in the listing of HDFC Standard Life as Max Financial Services already trades on the Indian exchanges.

The combination of the entities would become India’s largest private sector life insurer, surpassing ICICI Prudential Life Insurance. It will be second only to state-run Life Insurance Corp. of India (LIC), which has a 70% share of new business premiums in the country.

As of 31 December 2015, ICICI Prudential Life had assets under management of ₹ 1.01 trillion.

The insurance sector has assets under management worth ₹ 22.4 trillion, of which the share of India’s 23 private sector insurers is only ₹ 4.61 trillion, according to the Insurance Regulatory and Development Authority of India (Irdai). The insurance indsutry generated ₹ 3.28 trillion in premiums last year, of which the private sector’s share was ₹ 88,433 crore, data shows.

According to Kalpesh Mehta, partner at Deloitte Haskins and Sells (India), a public market listing will increase the ability of these businesses to raise capital.

“These businesses need significant capital for growth. Also, listing will provide the promoters of these businesses, who have been invested for over a decade now, to unlock the value of their shareholding,” Mehta said. The industry is witnessing new premium collection growth of 12-14%, which is a reasonably healthy growth rate, he added.