Mumbai: HDFC Standard Life Insurance Co. Ltd, the fifth insurance company heading for an initial public offering (IPO) this year, on Monday said it would launch its Rs8,695 crore initial share sale on 7 November.
The IPO, a pure offer for sale, will see the two promoters of the life insurer—Housing Development Finance Corp. (HDFC) and Standard Life—sell 299.82 million shares. The public offering will close on 9 November.
The company has set a price band of Rs275-290 per share for the IPO. At the upper end of the price band, HDFC Standard Life Insurance will be valued at Rs58,277 crore. The IPO will see a dilution of 14.92% stake. HDFC and Standard Life will fetch Rs5,546.1 crore and Rs3,148.8 crore, respectively.
The HDFC Standard Life IPO comes at a time when the last three insurance IPOs have demonstrated weak listing day performances.
Shares of state-owned reinsurance company General Insurance Corp. of India Ltd (GIC Re) and SBI Life Insurance Co. Ltd were trading 6.29% and 6.4% below their respective IPO prices of Rs912 and Rs700 per share, as of close on Monday. Meanwhile, shares of ICICI Lombard General Insurance Co. Ltd, which went public in September, are trading at 2.9% above its issue price of Rs661 per share.
“We believe that the pricing is right. We also feel that we have left money on the table for investors. In fact, we did not listen to the advice from some of the bankers to price the issue higher," said HDFC chairman Deepak Parekh.
Insurance is a long-term sector, so investors should not have a perception of making money on the first day, he said. Parekh added that investors should look at the strong performance of the firm, which has seen its embedded value grow in a span of six months to Rs14,000 crore as of 30 September, from Rs12,000 crore in March. Embedded value is a measure of valuing insurance businesses.
In fiscal 2017, HDFC Standard Life’s new business premium grew 34% to Rs8,696.3 crore, from the previous year. As on 30 September, the firm had assets under management of Rs99,530 crore.
Amitabh Chaudhry, managing director and chief executive of HDFC Standard Life Insurance, said the Indian insurance industry is expected to see robust growth in the days ahead, on the back of several tailwinds.
“Given India’s GDP growth outlook, it is expected that the financial savings in the economy is going to continue to increase. In addition, favourable demographics and the under penetration of life insurance in India are other factors that speak of the robust growth of the industry going ahead," he said.
The HDFC Standard Life Insurance IPO will follow the Rs9,600 crore initial share sale of state-owned general insurance company New India Assurance Co. Ltd, which opens on 1 November. The insurance company has set a price band of Rs770-800 per share for the IPO, which values it at Rs64,392-67,940 crore. The offer will close on 3 November.
The HDFC Standard Life IPO is the second largest this year after General Insurance Corp. of India Ltd’s Rs11,372 crore initial share sale.