Issue Date: 11th Oct ? 13th Oct 2017
Price Band(Rs): 855-912 |??Lot Size (No. of Share): 16
Company Background
Incorporated in 1972, General Insurance Corporation of India is the largest reinsurance company in India in terms of gross premiums. They provide various general insurance products like property, energy, marine, engineering, miscellaneous, aviation-hull/spares-rotor wing, aviation-hull/spares-fixed wing, liability, aviation treaty?hull, spares and liability insurance products. They also offer cargo and offshore energy, motor, life, agriculture, space, health, credit and financial insurance.
Issue Details
| Issue Opens | 11-Oct-17 |
| Issue Closes | 13-Oct-17 |
| Issue Size(Rs in Crore) | 11,372.64 |
| Face value(per equity share) | 5 |
| Price Band(Rs.) | 855-912 |
| Lot Size(No of Share) | 16 |
| No of Shares on Offer(Crore) | 12.47 |
| QIB(%) | 50% |
| Non-Institutional(%) | 15% |
| Retail(%) | 35% |
| Commencement of Trading | 25-Oct-17 |
Strengths
- Leader in Indian reinsurance industry with 44 years of experience and has an International presence.
- Diversified product portfolio and revenue streams.
- Strong financial track record and a strong balance sheet.
- Experienced management team.
Concerns
- Operate in highly competitive environment, no strong entry barriers.
- Substantial increase in agri reinsurance business in recent years.
- Analytic models as tool to evaluate risk are subject to uncertainty.
Our View
On the upper price band of Rs.912 and on FY17 EPS of Rs.36.15, P/E ratio works out to 25x. Even based on last 3years restated EPS of Rs34.8, P/E ratio works out to 26.2x. Means, company is asking higher price band of Rs912 in the P/E ratio of 25x to 26.2x. There is no listed peers in reinsurance business to compare whether the issue price is underpriced or overpriced.
Company gross premiums grew at 48% CAGR in the last 3 years. However, margins are on declining mode. The company?s gross premium growth should remain sturdy in the coming years due to growth in Indian non?life insurance industry, expanding reinsurance market and tapping of new global markets. Considering the positives such as leadership position, robust balance sheet and reasonable valuations provide comfort. We recommends investors to subscribe for long term gains.