HDFC Standard Life Insurance (HDFC Life), the third largest private sector life insurance company, was subscribed on second day of the initial public offer (IPO). The issue was subscribed 4.88 times today, the last day for subscription. The initial public offer of HDFC Standard Life Insurance Company was oversubscribed 1.15 times on the second day of bidding on Wednesday.
Ten Things to know about HDFC Life IPO:
1. The IPO, estimated to raise Rs 8,695 crore, received bids for 1,07,23,34,400 shares against the total issue size of 21,97,59,218 shares, NSE data showed.
2. Total size of the IPO is nearly 15 per cent of the paid-up capital that amounts to Rs 8,245 crore to Rs 8,695 crore. Till Tuesday, the IPO got subscribed 46 per cent.
3. Price band for the offer has been fixed at Rs 275-290 per share.
4. HDFC Standard Life Insurance Company on Monday raised Rs 2,322 crore from anchor investors. HDFC Life's profit after tax for past three fiscals was Rs 786 crore, Rs 817 crore and Rs 887 crore and it rose by 8 per cent, 4 per cent and 9 per cent, respectively.
5. HDFC Life's earnings per share for the past three fiscal years stood at Rs 3.9, Rs 4.1 and Rs 4.4. The price equity ratios (P/E) for past three fiscal years (2015, 2016, 2017) were 74, 71 and 66, respectively. Price to book value (P/BV) ratios were 23, 19 and 15.
6. At the upper band of Rs 290, the issue is valued at 4.2 times of second quarter of 2018 fiscal embedded value (EV) of Rs 14,011 crore, a bit higher than close listed players SBI Life and ICICI Pru which are trading at 3.6 times and 3.3 times of their second quarter earnings, respectively. However, Angel Broking believes that the slight premium is justifiable, considering, consistent growth across premium categories, improving dividend payout over the last four years, strong parentage, trusted brand name, highest VNB margin (22 per cent for FY2017) and well balanced business mix.
8. HDFC Life was established in the year 2000 as a joint venture between HDFC and Standard Life Aberdeen Plc, initially through wholly owned subsidiary. At present, HDFC owns 61.41 per cent stake in HDFC Standard Life and Standard Life has about 34.86 per cent stake, while the remaining is with employees and PremjiInvest. Currently, HDFC owns 61.21 per cent in the joint venture, which will come down to 51.69 per cent, while Standard Life's 34.75 per cent shareholding will come down to 29.35 per cent post the IPO.
9. Over the past two financial years (2015 to 2017), overall total premium grew at compound annual growth rate or CAGR of 14.5 per cent to Rs 19,445 crore. It has reported healthy return on equity of 23 per cent and Operating Return on Embedded Value of 21.7 per cent for the fiscal year 2017.
10. The VNB (Value of New Business) margin has increased by 350 basis points to 22 per cent over the past two fiscals, which is the highest in the industry - ICICI Prudential has 10 per cent, SBI Life has 15.4 per cent. Angel Broking said that healthy VNB margin has kept HDFC Life self-sustained, and hence, it would not require diluting capital very often. (With Agency Inputs)