We are building this franchise for the next 100 years: Bhargav Dasgupta, ICICI Lombard
ET Now|
Updated: Sep 27, 2017, 02.35 PM IST
Talking to ET Now, Bhargav Dasgupta , MD & CEO, ICICI Lombard, says if there is an inorganic opportunity that we find valuable, we might look at that and if for that we need capital that is a different story altogether.
Edited excerpts:
The ICICI Lombard got listed on the stock markets today. What does it mean for you?
It is an exciting event for us and we are really looking forward to this journey as a listed company. We built a franchise over the last 16 years which has become the leader in the private space not just in terms of premium but in terms of the other aspects of business. Going ahead, we also need to focus on building on this leadership platform and continue to provide value to our new stakeholders who are our shareholders.
At a valuation of close to about Rs 30000 crore with the listing price between Rs 651 and Rs 661, do you feel that perhaps the issue was a bit overpriced considering that the stock did list at a slight discount? How would you understand the listing price and what do you expect going forward as far as investors who bought the stock is concerned?
What we were most heartened by was the fact that the long-term investors who are aware of the value of the franchise that we built gave us the valuation that we got. So, the 30000 crore valuation was based on socialising the issue with long investors, long in QIB and the FIIs and the DIIs. In terms of the pricing, I would believe that investors who are looking at long-term investment, would see value in this franchise even today because the underlying opportunity in general insurance is huge.
If you look at the under penetration, the density of our numbers are one-tenth of China, so there is a huge runway of growth. Within that, we have built a franchise which stands apart in terms of quality and if there is a company that can take advantage of that opportunity going ahead, we believe we can. We remain optimistic about the quality of investment that we have had and the fact that they are really long-term investors. We believe that for them, over a longer period of time, this will be a very good investment.
Also there is a thick pipeline as far as other insurance companies in the general insurance space are concerned. We have New India Insurance General, GIC all are looking to list very soon. What will it take to maintain your leadership position in terms of valuation and also in terms of how you continue to remain attractive to investors considering that we do expect more offerings in the general insurance space?
Globally, insurance is the core part of any economy. In most of the markets you will see a number of insurance companies in the top 10, top 20 companies. So, having four-five companies from insurance is not a large number in the context of India. Coming back to your specific question on where we see our leadership position at the end of the day, we have been able to build this leadership position with certain focus strategies that we have adopted one fundamentally a focus on customers. At the end of the day the entire organisation is geared up towards servicing its customers well and we believe that if you want to create an institution, if you focus on customers they will reward you in terms of the leadership position that you can create so that is something that we will continue to focus on.
The second is in terms of using technology for multiple aspects be it innovation, be it in terms of convenience for a customers, be in terms of new sales channels, be it in terms of cost I think that is something we will continue to deliver upon.
The third biggest aspect it is there is a distribution to build because at the end of the day insurance is a business where you need to create a large distribution and now we are selling insurances more than 600 districts of this country. That is something we will continue to focus on.
General insurance of course has exponential growth prospects in India. As you have mentioned, the market is under-penetrated but at least for the next six months, there is some concern about India’s economic growth. This is a short to medium term story. According to experts and economists, because the long term potential of India is intact, one wonders your strategy for growth in the next five years considering that we do see some structural cracks in the economy. The investments cycle is not kicking in, GDP is at 5.7% last quarter compared to last year and there is concern about growth as well. In this background, how do you read the prospect in the next five years and what will be some milestones that you will need to crack in the coming five years based on the strategies you want to put in place?
We get over worried about short term news and we let it cloud our judgments. If you look at a longer term journey for India and within that for insurance we believe we have a very robust opportunity here in India and within that in insurance. What we would focus on would not at all be coloured by the headlines that we see in terms of some structural issues with the growth numbers in this quarter or the next quarter. We remain extremely optimistic and bullish about India over a long period of time and we remain extremely optimistic and bullish about general insurance as a sector.
We are building this franchise not for the next quarter, we are building this franchise for the next 100 years and that is what we will continue to focus on and strategies that we have adopted I do not see a need for a radical shift in any of those strategies. What some of these events give us is an opportunity for dislocations in the market which gives us opportunity as long-term players to enter segments that we probably could not enter in the past for multiple reasons so we see these are positive opportunities for us.
What would the new structure look like for shareholders? The last time when we spoke you mentioned that you hoped to welcome a whole new range of investors. What will ICICI Lombard look for this fiscal in terms of investor shareholding and going forward would you be looking to bring in one more partner with more shareholding considering the capital intensive nature of the business?
In terms of the capital for us as you know this is an offer for sale. We did not get any capital but it is also because we do not need any capital. In solvency, we are way ahead of the regulatory requirement. If I look at our growth plans over the next five years and the profit growth that we are seeing as a company, we do not see the need for dilution. So, there would not be a need for capital infusion for our organic business. If there is an inorganic opportunity that we find valuable, we might look at that and if for that we need capital that is a different story altogether.
Edited excerpts:
The ICICI Lombard got listed on the stock markets today. What does it mean for you?
It is an exciting event for us and we are really looking forward to this journey as a listed company. We built a franchise over the last 16 years which has become the leader in the private space not just in terms of premium but in terms of the other aspects of business. Going ahead, we also need to focus on building on this leadership platform and continue to provide value to our new stakeholders who are our shareholders.
At a valuation of close to about Rs 30000 crore with the listing price between Rs 651 and Rs 661, do you feel that perhaps the issue was a bit overpriced considering that the stock did list at a slight discount? How would you understand the listing price and what do you expect going forward as far as investors who bought the stock is concerned?
What we were most heartened by was the fact that the long-term investors who are aware of the value of the franchise that we built gave us the valuation that we got. So, the 30000 crore valuation was based on socialising the issue with long investors, long in QIB and the FIIs and the DIIs. In terms of the pricing, I would believe that investors who are looking at long-term investment, would see value in this franchise even today because the underlying opportunity in general insurance is huge.
If you look at the under penetration, the density of our numbers are one-tenth of China, so there is a huge runway of growth. Within that, we have built a franchise which stands apart in terms of quality and if there is a company that can take advantage of that opportunity going ahead, we believe we can. We remain optimistic about the quality of investment that we have had and the fact that they are really long-term investors. We believe that for them, over a longer period of time, this will be a very good investment.
Also there is a thick pipeline as far as other insurance companies in the general insurance space are concerned. We have New India Insurance General, GIC all are looking to list very soon. What will it take to maintain your leadership position in terms of valuation and also in terms of how you continue to remain attractive to investors considering that we do expect more offerings in the general insurance space?
Globally, insurance is the core part of any economy. In most of the markets you will see a number of insurance companies in the top 10, top 20 companies. So, having four-five companies from insurance is not a large number in the context of India. Coming back to your specific question on where we see our leadership position at the end of the day, we have been able to build this leadership position with certain focus strategies that we have adopted one fundamentally a focus on customers. At the end of the day the entire organisation is geared up towards servicing its customers well and we believe that if you want to create an institution, if you focus on customers they will reward you in terms of the leadership position that you can create so that is something that we will continue to focus on.
The second is in terms of using technology for multiple aspects be it innovation, be it in terms of convenience for a customers, be in terms of new sales channels, be it in terms of cost I think that is something we will continue to deliver upon.
The third biggest aspect it is there is a distribution to build because at the end of the day insurance is a business where you need to create a large distribution and now we are selling insurances more than 600 districts of this country. That is something we will continue to focus on.
General insurance of course has exponential growth prospects in India. As you have mentioned, the market is under-penetrated but at least for the next six months, there is some concern about India’s economic growth. This is a short to medium term story. According to experts and economists, because the long term potential of India is intact, one wonders your strategy for growth in the next five years considering that we do see some structural cracks in the economy. The investments cycle is not kicking in, GDP is at 5.7% last quarter compared to last year and there is concern about growth as well. In this background, how do you read the prospect in the next five years and what will be some milestones that you will need to crack in the coming five years based on the strategies you want to put in place?
We get over worried about short term news and we let it cloud our judgments. If you look at a longer term journey for India and within that for insurance we believe we have a very robust opportunity here in India and within that in insurance. What we would focus on would not at all be coloured by the headlines that we see in terms of some structural issues with the growth numbers in this quarter or the next quarter. We remain extremely optimistic and bullish about India over a long period of time and we remain extremely optimistic and bullish about general insurance as a sector.
We are building this franchise not for the next quarter, we are building this franchise for the next 100 years and that is what we will continue to focus on and strategies that we have adopted I do not see a need for a radical shift in any of those strategies. What some of these events give us is an opportunity for dislocations in the market which gives us opportunity as long-term players to enter segments that we probably could not enter in the past for multiple reasons so we see these are positive opportunities for us.
What would the new structure look like for shareholders? The last time when we spoke you mentioned that you hoped to welcome a whole new range of investors. What will ICICI Lombard look for this fiscal in terms of investor shareholding and going forward would you be looking to bring in one more partner with more shareholding considering the capital intensive nature of the business?
In terms of the capital for us as you know this is an offer for sale. We did not get any capital but it is also because we do not need any capital. In solvency, we are way ahead of the regulatory requirement. If I look at our growth plans over the next five years and the profit growth that we are seeing as a company, we do not see the need for dilution. So, there would not be a need for capital infusion for our organic business. If there is an inorganic opportunity that we find valuable, we might look at that and if for that we need capital that is a different story altogether.
