ICICI Lombard General Insurance Co Ltd (ILGI), which is the general insurance arm of ICICI Bank group, will hit the market for raising money through its IPO on September 15. Last year, the group came with first life insurance sector arm ICICI Prudential Life Insurance IPO that after initial hiccups surged and continues to do well. Now it is coming out with a maiden offer for its general insurance arm which is ranking first among private sector general insurance companies with better product mix and having better business on all fronts.
ILGI is the largest private-sector non-life insurer in India based on gross direct premium income in fiscal 2017, a position it has maintained since fiscal 2004. The company offers its customers a comprehensive and well-diversified range of products, including motor, health, crop/weather, fire, personal accident, marine, engineering and liability insurance, through multiple distribution channels. It was founded as a joint venture between ICICI Bank Limited and Fairfax Financial Holdings Limited, a Canadian based holding company which, through its subsidiaries, is engaged in property and casualty insurance and reinsurance and investment management.
The Indian economy is one of the fastest growing large economies in the world, while the Indian non-life insurance industry, based on gross direct premium income, grew at a cumulative annual growth rate of 16.6% during the same period. The Indian non-life insurance industry was the 15th largest non-life insurance market in the world and the fourth largest in Asia in terms of gross direct premium income in the year ended December 31, 2016.
ILGI is coming out with its maiden IPO via secondary route through book building process. It is offering 86247187 equity share of Rs. 10 each in a price band of Rs. 651 to Rs. 661 to mobilize Rs. 5614.69 to Rs. 5700.94 crores. Issue opens for subscription on 15.09.17 and will close on 19.09.17. Minimum application is to be made for 22 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE and NSE.
On performance front, ILGI has posted total revenues/net profits of Rs. 5028.41 cr. / Rs. 520.07 cr. (FY14), Rs. 5044.81 cr. / Rs. 585.32 cr. (FY15), Rs. 5804.25 cr. / Rs. 505.34 cr. (FY16) and Rs. 7180.49 cr. / Rs. 641.82 cr. (FY17). For first quarter ended on 30.06.17 of the current fiscal, it has earned net profits of Rs. 214.34 crore on total revenues of Rs. 1881.88 crore. If we annualize latest working and attribute it on post issue equity then asking price is at a P/E of around 35 and at a P/BV of 7.6. Last three fiscal’s average RoNW is 18.42%. It has no listed peers to compare with. Average cost of acquisition by ICICI Bank and FAL, the selling stakeholders is Rs. 43.62 and Rs. 137.97 per share respectively.
Conclusion: ILGI is set to gain first mover fancy in the sector post listing as many more companies in this segment are lining up for maiden offers going forward. Issue appears to be fully priced. Future for this segment is bright. Considering all these aspects, investment for long term may be considered. (Subscribe).
DISCLAIMER: No financial information whatsoever published anywhere here should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is purely for educational and information purposes only and under no circumstances should be used for making investment decisions. Readers must consult a qualified financial advisor prior to making any actual investment decisions, based on information published here. Any reader taking decisions based on any information published here does so entirely at own risk. Above information is based on RHP and other documents available as of date coupled with market perception. Author has no plans to invest in this offer.
(SEBI registered Research
Analyst-Mumbai).
(Email: dilip_davda@rediffmail.com)
