The initial public offer (IPO) of the country’s largest insurer in the private sector, ICICI Prudential Life Insurance Corporation (I-Pru), opens today for subscription. On offer are 18.13 crore equity shares of Rs 10 each via book building route in price band of Rs 300-344/share.
According to reports, I-Pru had Rs 1.09 trillion worth of Assets under Management (AUM) as of June 30, 2016, making it one of the largest fund managers in India. Ahead of its IPO, it raised Rs 1,635 crore from anchor investors.
Here is a quick compilation of recommendations from leading brokerages on whether should you subscribe to the offer or not.
NOMURA
ICICI Prudential Life’s IPO price of Rs 300-334 per share implies a valuation of Rs 43,000-48,000 crore. On March-18 enterprise value (EV), this implies a valuation of 2.45-2.73 times which is a 20-30% discount to the multiple of HDFC+ Max Life combined.
Excluding excess capital (solvency at 200%), ICICI Pru Life’s EV multiple is 2.9-3.2 times March 2018 EV. This implies a 10-20% discount to the EV multiple for HDFC + Max combined. Our price target for ICICI Bank is Rs 285/share. Benchmarking ICICI Pru Life’s valuation to Rs 43,000 - 47,800 crore would imply 4-6% upside to our price target for ICICI Bank.
MOTILAL OSWAL RESEARCH
The company relies heavily on bancassurance and has tied up with ICICI Bank, Standard Chartered Bank and Capital Small Finance Bank for product distribution. Bancassurance accounted for over 58% of retail APE in FY16. We believe termination of one or more of these partnerships poses significant threats to the business over the medium-term.
That apart, over 80% of retail Annual premium equivalent (APE) for FY16 was in ULIPs. This makes the company prone to the cyclicality of the stock markets, as retail investors generally purchase ULIPs during stock market booms and vice-versa. This could impact new business premiums as well as margins. Additionally, the company has a low share of non-participating business, which is a read full story
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