New India Assurance IPO - Offer Price
Shares are sold at a price band of Rs 770 to Rs 800.
Investors can apply up to a maximum of Rs 2 lakh in the retail category and above Rs 2 lakh in the non- institutional (HNI) category.
Lot Size
Investors can apply in lot size of 18 shares and in multiples thereafter.
New India Assurance - Company Profile
New India Assurance provides insurance across fire, marine, aviation, motor crop, health, and other insurance. The company has been in operation for almost a century. According to CRISIL Research, in FY17, it had largest market share of 15 per cent of gross direct premium among general insurers in India. It issued 27.10 million policies in FY17, highest among all general insurance companies in India.
Financials
According to Angel Broking, New India Assurance has been able to grow its net premium by steady CAGR of 16 per cent over FY2013-17. "But on profitability front it has been reporting very inconsistent PAT, which has declined 2 per cent CAGR over FY2013-17 (PAT for FY2013 - Rs 914 crore, FY2014 - Rs 805 crore, FY2015 - Rs 1,377 crore, FY2016 - Rs 930 crore and FY2017 - Rs 840 crore). On the contrary, other listed general insurance company ICICI Lombard has grown its net premium at CAGR of 15 per cent over FY2013-17. However, PAT grew at healthy CAGR of 22 per cent over FY2013-17," the brokerage said.
Combined Ratio
"The combined ratio is a measure of the profitability of an insurance company's underwriting business. Combined ratio is the sum of loss ratio, expense ratio and commission ratio. A ratio below 100 per cent usually indicates that the insurance company generates a margin in its insurance operations, while a ratio above 100 per cent usually indicates that insurance company is paying out more money in claims and operating expenses than it is receiving from premiums. New India Assurance's combined ratio consistently remained high for last 5 years at more than 115 per cent and for FY2017 company reported combined ratio of 120 per cent," according to a note from Angel Broking.
What Brokerages Say On New India Assurance IPO
Angel Broking has a neutral rating on the issue. "At the upper price band of Rs 800 the issue is offered at 5 times FY2017 book value and 76 times FY2017 EPS. Its listed peer ICICI Lombard is trading at 8 times FY2017 book value and 48 times FY2017 EPS. ICICI Lombard reported decent ROE of 17 per cent and average ROE for last 5 years is 19 per cent, while New India Assurance reported subdued ROE of 7 per cent for FY2017 and average ROE of 9 per cnet. NIA's combined ratio is consistently higher than 115 per cent, which is impacting the profitability of the company. Considering the subdued ROE, inconsistent PAT and higher combined ratio, we recommend neutral rating on the issue," the brokerage says.
Motital Oswal has a subscribe rating on New India Assurance IPO. "We remain positive on the company due to 1) Longstanding global footprint and successful international operations, 2) Diversified product offering and innovation capability, 3) Multi-channel distribution network and 4) strong solvency ratio. At upper price band, the issue is priced at price/book of 5.1x post issue (and 5x FY17 pre issue). We recommend subscribe for long term investment," says Motilal Oswal in a note.
Risk Factors
ICICIDirect.com in a note has highlighted the following risk factors for New India Assurance:
Inability to maintain market share or effectively address the requirement of customers
Any termination or adverse change in relationship or arrangement with brokers, bancassurance partners or other distribution intermediaries
An inability to compete in the highly competitive insurance industry
Catastrophic events, including natural disasters, may result in significant liabilities for claims by policyholders
