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Last Day To Subscribe ICICI Lombard IPO: Should You Subscribe?

The Rs 5,700 crore ICICI Lombard IPO will give the company a valuation of Rs 30,000 crore post the issue.

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Last Day To Subscribe ICICI Lombard IPO: Should You Subscribe?

ICICI Lombard IPO is purely an offer for sale by promoters.


Today is the last day to subscribe to ICICI Lombard's IPO. As of 11.15 pm, the IPO was subscribed 1.1 times. Bidding for the IPO will end later today. The IPO of ICICI Lombard General Insurance Company, India's largest private sector non-life insurer (in terms of gross direct premium income (GDPI), had launched the initial public offer of its shares on Friday. ICICI Lombard IPO is the first of its kind by any non-life insurance company in India. The Rs 5,700 crore public issue of ICICI Lombard will give the insurer a valuation of Rs 30,000 crore post the issue. Priced in a band of Rs 651-661, the issue can be subscribed in lot sizes of 22 shares. ICICI Lombard has already raised Rs 1,624 crore by allotting shares to anchor investors. 

Here are 10 things to know about ICICI Lombard General Insurance Company IPO:



1) ICICI Lombard IPO is purely an offer for sale by its existing investors and the company does not intend to raise any fresh capital through this issue. Post this issue, ICICI Bank's shareholding in the company will fall to 55.9 per cent from 62.9 per cent while Fairfax Financial's holding will reduce by 12 per cent to 9.9 per cent.

2) ) ICICI Lombard General Insurance Company, which is a joint venture between ICICI Bank and Fairfax Financial of Canada, is India's largest private sector non-life insurance company with market share of 20.2 per cent in the first quarter of FY2018 among all the private non-life insurance players in India. While among all the non-life insurers, its share was 10 per cent.

3) ICICI Lombard has maintained its leadership position among private non-life insurers since 2004, supported by its robust franchise, comprehensive product portfolio and multi-channel distribution network, say analysts.

4) In FY2017, the company reported a gross direct premium income (GDPI) of Rs 10,730 crore up 32.6 per cent over FY2016. Its GDPI has grown at a CAGR of 12 per cent in last four years. For the first quarter of current fiscal, ICICI Lombard has reported a GDPI of Rs 3,321 crore with 43.2 per cent coming from direct sales channels compared to industry average of 31.6 per cent.

5) ICICI Lombard has a diversified product mix comprising motor, health & personal accident, crop/ weather, fire, marine and engineering insurance products, which contributed 42.3, 18.9, 20.1, 6.9, 3.2 and 2.1 per cent to its GDPI in FY2017 respectively.

6) ICICI Lombard's leadership position is also supported by its superior customer service experience. It settled 92.2 per cent of motor claims in FY2017 within 30 days compared to 81.9 per cent claim settlement by private sector players on an average. Further, the number of grievances against the company reduced to 3,515 in FY17 from 5,704 in FY15, despite rise in number of policies written to around 17.7 million from around 13.9 million during the same period.

7) ICICI Lombard's solvency ratio (size of its capital against the risk it has undertaken) is one of the best in the industry. In FY2017, it stood at 2.10 times compared to insurance regulator IRDAI-prescribed level of 1.50 times and industry average of 1.95 times.

8) ICICI Lombard has reported a net profit of Rs 642 crore in FY17, up 27 per cent over the previous fiscal. For the first quarter of current fiscal, the company reported a net profit of Rs 214.3 crore, an annual growth of 66 per cent.

9) At the upper end of the price band, ICICI Lombard shares are priced at 35 times its annualised earnings per share for the first quarter of FY2018, which provides a healthy investment opportunity for the long-term investors, says Reliance Securities. The brokerage has a "subscribe" rating on ICICI Lombard IPO. "Looking ahead, we expect ICICI Lombard to deliver strong performance on the back of lower general insurance penetration in India," the brokerage said. Angel Broking, another brokerage, also has "subscribe" rating on ICICI Lombard IPO.

10) Despite the promising growth potential that ICICI Lombard offers, its business comes with lots of risk. Catastrophic events could materially increase its liability for claims, say analysts. Other than this, adverse changes in regulatory framework, inability to address increasing competition are other risks in its business.

 



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