Issue Date:?01st Nov?? 03rd Nov 2017
Price Band(Rs):?770- 800?|??Lot Size (No. of Share):?18
Company Background
Incorporated on July 23, 1919 at Mumbai, The New India Assurance Co. Ltd (NIA) is the oldest and largest general insurance company in India. The company was nationalized by the GoI on January 1, 1974. The President of India, acting through the MoF is the promoter of the company and holds 100% of the pre-Offer paid-up Equity Share capital of the company. NIA offers insurance in categories including fire insurance; marine insurance, motor insurance, crop insurance, health insurance and other insurance products.
Issue Details
| Issue Opens | 01-Nov-17 |
| Issue Closes | 03-Nov-17 |
| Issue Size(Rs in Crore) | 9600.00 |
| Face value(per equity share) | 5 |
| Price Band(Rs.) | 770-800 |
| Lot Size(No of Share) | 18 |
| No of Shares on Offer(Crore) | 12.0 |
| QIB(%) | 50% |
| Non-Institutional(%) | 15% |
| Retail(%) | 35% |
| Commencement of Trading | 13-Nov-17 |
Strengths
- Market leadership and established brand for around 100 years.
- Diversified product offering.
- Strong relationship with reputed reinsurers.
- Expansive multi-channel distribution network.
Concerns
- Catastrophic events could have material adverse effect on operations
- Inability to bring down high combined ratios in future
- Significant business is generated from relatively few regions
- Additional risks associated with international operations
- International operations since 1920. Presence in UK with a desk at Lloyd?s, London. Also have operations in Japan and Australia for over 50 years.
Our View
On the upper price band of Rs.800 and on standalone restated FY17 EPS of Rs.10.25, P/E ratio works out to 78x. Even based on last 3years restated EPS of Rs11.88, P/E ratio works out to 67x. ?Means, company is asking higher price band of Rs800 in the P/E ratio of 67x to 78x. Its recently peers like ICICI Lombard General Insurance is trading at P/E ratio of 47x. Hence New India Assurance Issue price of Rs800 at P/E ratio of 67x is over priced.
While the issue looks expensive and it earns low margins, but future growth potential of general insurance and given the company?s market leadership position, reputation and strong brand name. We recommend the investors to subscribe from a longer term view and not for the purpose of accruing listing gains.