HDFC Life IPO Opens Tomorrow: 10 Things To Know

HDFC Standard Life Insurance (HDFC Life), the third largest private sector life insurance company, aims to go public with its initial public offer (IPO) on Tuesday. Its issue will open on November 7 and close on November 9. The total number of shares on sale are 29.98 crore with each having a face value of Rs 10. After the IPO, HDFC Life's market cap will range between Rs 55,247 crore (lower price band) and Rs 58,260 crore (upper price band).

Ten Things to know about HDFC Life IPO:

1. The shares are offered in the price band of Rs 275 to Rs 290.

2. Total size of the IPO is nearly 15 per cent of the paid-up capital that amounts to Rs 8,245 crore to Rs 8,695 crore.

3. HDFC Life's profit after tax for past three fiscals was Rs 786 crore, Rs 817 crore and Rs 887 crore and it rose by 8 per cent, 4 per cent and 9 per cent, respectively.

4. HDFC Life's earnings per share for the past three fiscals stood at Rs 3.9, Rs 4.1 and Rs 4.4.

5. At the upper band of Rs 290, the issue is valued at 4.2 times of second quarter of 2018 fiscal embedded value (EV) of Rs 14,011 crore, a bit higher than close listed players SBI Life and ICICI Pru which are trading at 3.6 times and 3.3 times of their second quarter earnings, respectively. However, Angel Broking believes that the slight premium is justifiable, considering, consistent growth across premium categories, improving dividend payout over the last four years, strong parentage, trusted brand name, highest VNB margin (22 per cent for FY2017) and well balanced business mix.

6. The price equity ratios (P/E) for past three fiscals (2015, 2016, 2017) were 74, 71 and 66, respectively. Price to book value (P/BV) ratios were 23, 19 and 15.

7. HDFC Life was established in the year 2000 as a joint venture between HDFC and Standard Life Aberdeen Plc, initially through wholly owned subsidiary.

8. Currently, HDFC owns 61.21 per cent in the joint venture, which will come down to 51.69 per cent, while Standard Life's 34.75 per cent shareholding will come down to 29.35 per cent post the IPO.

9. Over the past two financial years (2015 to 2017), overall total premium grew at compound annual growth rate or CAGR of 14.5 per cent to Rs 19,445 crore. It has reported healthy return on equity of 23 per cent and Operating Return on Embedded Value of 21.7 per cent for the fiscal year 2017.

10. The VNB (Value of New Business) margin has increased by 350 basis points to 22 per cent over the past two fiscals, which is the highest in the industry - ICICI Prudential has 10 per cent, SBI Life has 15.4 per cent. Angel Broking said that healthy VNB margin has kept HDFC Life self-sustained, and hence, it would not require diluting capital very often.