ICICI Pru Life IPO the new hot cake in the market

Analysts went gung-ho about ICICI Prudential Life Insurance Company IPO, opened for subscription last day on 20th September and is supposed to close on September 21. For the last one year, lot of investor activities created a stir in the insurance sector. It was boosted with ICICI Prudential Life Insurance’s primary offer, the first by an Indian insurance company, which hit the market the previous day. On 18th July, ICICI Prudential Life registered its IPO proposal with the Securities and Exchange Board of India (Sebi) and earned the regulator’s approval on 2 September.

What is the Buzz all About?

The IPO by ICICI Bank is an offer for sale, which indicates that the private lender is offloading part of its shareholding in the insurer. Post the IPO, ICICI Bank’s stake in ICICI Prudential will roll down to 55 per cent. ICICI Prudential’s market capitalization will hopefully be Rs 48,000 crore if the issue gets subscribed at the upper end of the price band.

India’s largest private life insurer, ICICI Prudential Life Insurance raised around Rs. 6,050 crore last day. This is the first initial public offer (IPO) by any life insurance company in India. After state-owned Coal India raised over Rs. 15,000 crore in 2010, it is the biggest IPO since then. The IPO is supposed to close on September 22. Also, ICICI Prudential raised Rs. 1,635 crore from anchor investors, last week.

More about the IPO

On Monday, the IPO received applications for 20.89 million shares against 132.37 million shares, as per the data showed by stock exchange. The institutional investor category was subscribed 5.8%, whereas the non-institutional category constituting high-net-worth individuals was subscribed 4.4% or 0.04 times.

Retail investors, whose investments cannot surpass Rs.2 lakh per individual, is seen to subscribe to 24.93% of the 57.12 million shares on offer. The part kept for shareholders was subscribed 20.15%. This is for the current ICICI Bank shareholders as on 7 September and looking to bid additional shares apart from their original applications.

ICICI Prudential gained the sight of more than 1.5 lakh applications from retail investors on the first day. ICICI Bank shareholder reservation portion is subscribed 13 per cent. The public offer will be closed on Wednesday, where the stock would be provided in a price band ranging between Rs 300-334 per share. Before the commencement of the IPO, ICICI Prudential assigned more than 4.89 crore shares at Rs 334, the top-end of the price band, totaling to Rs 1,635.33 crore to a clutch of anchor investors. The public offer includes up to 18,13,41,058 equity shares of ICICI Prudential Life Insurance Company, comprising a reservation of up to 1,81,34,105 equity shares (10 per cent of the offer) for the shareholders of ICICI Bank.

Parent firm ICICI Bank Ltd is looking forward to unload a 12.63% stake in the life insurance arm via the offer-for-sale (OFS)?route. As of now, ICICI bank share priceclosed above 0.18% at Rs. 272.10. Prudential Corp. Holdings Ltd is also hoped to trim its stake in insurance company by 5.83% after getting listed as part of the revised terms of the joint venture (JV) agreement. ICICI Bank and Prudential decided to cast off their stake in the insurer with a floor of 54% and 20% stake, respectively, in order to make the listed entity compliant with the Sebi’s minimum public shareholding norms. Presently, ICICI Bank grips 67.52% and Prudential 25.83% as the two promoters of India’s biggest private sector life insurer. The rest is occupied by others like billionaire investor Azim Premji’s firm M/s Hasham Traders (4%) and Compassive Investment Pte. Ltd (2%), a wholly-run unit of Temasek Holdings.

Following the initial share sale, ICICI Bank’s stake in the insurer will slip to 54.89%, leaving a narrow scope for ICICI Bank to discard more stake as part of the foreign investment policy in the insurance sector. Investment banks ICICI Securities Ltd and Bank of America Merrill Lynch have been hired as the tier-I banks to manage the share sale.

Snippets of ICICI Prudential Life Insurance Company

At the end of Financial Year ‘16, ICICI Prudential was the biggest private sector insurer in India having a market share of 11.3 percent. The company boasts of 521 offices with 10,663 employees and 1,21,016 advisors all over India as of FY16. ICICI Pru Life’s total premium and net profit has risen at a CAGR of 8 percent and 5 percent in the past four years, respectively. Nonetheless, the company has routinely generated return on equity (ROE) in surplus of 30 percent in last four years. Apart from that, the company’s claim-settlement ratio was 96.2 percent for FY16 which was considered to be the highest in the private life insurance space, followed by Max Life (94 percent) and HDFC Life (91 percent).

ICICI Prudential Life noted a consolidated revenue amounting to Rs.8,884.37 crore for the three months to June. Its net profit is observed at Rs.404.9 crore for the same period. The company mentioned consolidated revenue of Rs.20,227.94 crore for full-year fiscal 2016 against Rs.33,955.76 crore in the financial year l 2015. Its net profit for FY16 is seen at Rs.1,652.72 crore versus Rs.1,640.35 crore in the year prior, as per the prospectus. As of 31 December 2015, ICICI Prudential Life had assets under management of Rs.1.01 trillion.

For more information on ICICI Prudential IPO please read "SEBI agrees for ICICI prudential IPO."

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