Issue Date:?07th Nov ? 09th Nov 2017
Price Band(Rs):?275- 290 |??Lot Size (No. of Share):?50
Company Background
Incorporated in 2000, HDFC Standard Life Insurance Co Ltd (HDFC Life) is Mumbai based life insurance provider in India. It offers a wide range of individual and group insurance solutions including Protection, Pension, Savings & Investment and Health, along with Children’s and Women’s Plan. HDFC Life is a joint venture between HDFC and Standard Life Aberdeen plc. It has over 414 branches and 15,406 full-time employees located across India.
Issue Details
| Issue Opens | 07-Nov-17 |
| Issue Closes | 09-Nov-17 |
| Issue Size(Rs in Crore) | 8,695.01 |
| Face value(per equity share) | 10 |
| Price Band(Rs.) | 275- 290 |
| Lot Size(No of Share) | 50 |
| No of Shares on Offer(Crore) | 29.98 |
| QIB(%) | 50% |
| Non-Institutional(%) | 15% |
| Retail(%) | 35% |
| Commencement of Trading | 17-Nov-17 |
Strengths
- Strong financial performance defined by consistent and profitable growth.
- Growing & profitable multi-channel distribution footprint.
- Strong parentage and a trusted brand.
- Strong distribution with bancassurance; focus rising on digital & agency.
Concerns
- Termination of or any adverse change in bancassurance agreements.
- Significant part of total NBP generated by unit-linked & par products.
- Major portion of business is generated from relatively few regions.
Our View
On the upper price band of Rs.290 and on restated FY17 EPS of Rs.4.5, P/E ratio works out to 64x. Even based on last 3years restated EPS of Rs4.3, P/E ratio works out to 67x. ?Means, company is asking higher price band of Rs290 in the P/E ratio of 64x to 67x. Its listed peers like SBI Life Insurance is trading at P/E ratio of 70x (Highest) and ICICI Pru Life is trading at P/E of 33x (Lowest) and industry average is 51. Hence HDFC Life issue price of Rs290 at P/E ratio of 64x to 67x is over priced.
Given the mature valuations and the outlook of insurance sector being bright, HDFC Standard Life is well-positioned to enjoy years of strong growth and enhanced profitability. Investors can subscribe from a long term perspective in this HDFC group IPO coming after 22 years.