ICICI Lombard, largest private general insurer in the country, has begun preparing for an Initial Public Offer (IPO) of equity. This could be the first such by a private general insurer.
It has begun discussion with investment bankers and aims to hit the market in the second half of this financial year, said two people familiar with the matter. The issue size is expected to be between Rs 3,500 and Rs 4,500 crore.
ICICI Lombard is a joint venture between ICICI Bank and Canada-based Fairfax Financial Holdings. The IPO will enable the shareholders to monetise their holdings. Fairfax, with 35 per cent in the venture, could divest its stake.
ICICI Lombard has 8.4 per cent of the market in general insurance. It is a presence in the vehicle, home, travel and health insurance spaces. The firm has 19,800 agents/brokers.
Interestingly, Fairfax has got a preliminary conditional nod from the Insurance Regulatory and Development Authority of India for a new non-life venture, with another partner. It is reportedly looking to part-sell its stake here to another buyer. By the regulatory requirement, Fairfax will have to bring down its holding to 10 per cent in ICICI Lombard.
Any such stake sale could have an indirect bearing on the valuation of ICICI Lombard, which was Rs 17,000-19,000 crore in recent brokerage reports. A dilution of 25 per cent would fetch the insurer around Rs 4,500 crore; a 15 per cent dilution would fetch about Rs 3,500 crore.
Apart from the direct stake sale, the public offer will allow Fairfax to further bring down its stake, if it wants to, through an Offer for Sale. Foreign investors may hold up to 49 per cent in Indian insurers.
An e-mail sent to ICICI Bank and to Fairfax did not get a response.
ICICI Lombard's net profit rose 38 per cent for 2016-17 to Rs 701.9 crore, from Rs 507.5 crore the previous year. Gross domestic premium income was a little more than Rs 10,000 crore.
The growth rate of the non-life insurance sector had slowed between 2012 and 2015. It has since turned around, due to a pick-up in economic activity. In 2015-16, the general insurance sector grew 13.8 per cent and underwrote direct premiums worth Rs 96,379 crore, according to General Insurance Council data.
As many as 57.5 million policies were issued in 2015-16 by private sector insurers, compared with 68.9 mn by public sector insurers. The former handled 6.4 mn claims, compared with 22.5 mn by the latter.
ICICI Prudential Life Insurance had gone public in September last year, with an issue size of about Rs 6,000 crore. The offfer was subscribed a little more than 10 times.
In January this year, the government cleared dilution of 25 per cent stake in five state-run general insurers - New India Assurance Company, United India Insurance, National Insurance Company and Oriental Insurance Company, beside reinsurer General Insurance.
