HDFC Standard Life Insurance IPO subscribed 1.17 times on day 2

HDFC Standard Life Insurance Company's initial public offer (IPO) was subscribed 1.17 times on the second day of bidding on Wednesday.

The IPO, estimated to raise Rs 8,695 crore, received bids for 25,78,71,850 shares against the total issue size of 21,97,59,218 shares, as per NSE data. The portion meant for qualified institutional buyers (QIBs) was subscribed 3.69 times, non-institutional investors (50 per cent) and retail investors 36 per cent. Till Tuesday, the IPO got subscribed 46 per cent.

HDFC Standard Life Insurance Company is a subsidiary of mortgage lender HDFC and raised Rs 2,322 crore from anchor investors, ahead of its initial public offer on November 7. Singapore's sovereign wealth fund Temasek, Norwegian fund Norges, Kuwait Investment, T Rowe Price, Fidelity, Blackrock and JP Morgan are among the anchor investors, according to a regulatory filing.

The IPO comprises sale of 1,91,246,050 equity shares, amounting to 9.55 per cent stake, by HDFC Ltd and up to 1,08,581,768 scrips, or 5.42 per cent, holding by Standard Life Mauritius. According to merchant banking sources, promoters are expected to get about Rs 7,500 crore from the stake dilution. The IPO which closes on November 9 can be subscribed at a price band of Rs 275-290 per equity share.

The equity shares offered in the IPO are proposed to be listed on the BSE and the NSE. HDFC Chairman Deepak Parekh said: "The funds raised will be used by HDFC Ltd for its business purposes as the insurance arm has adequate capital needed for growth." At present, HDFC owns 61.41 per cent stake in HDFC Standard Life and Standard Life has about 34.86 per cent stake, while the remaining is with employees and PremjiInvest. HDFC Standard Life was established as a joint venture between HDFC and Standard Life Aberdeen plc (global investment company), initially through its wholly owned subsidiary The Standard Life Assurance Company and now through its wholly owned subsidiary, Standard Life Mauritius.

The company has a pan-India presence, comprising 414 branches across India as of September 30, supported by a workforce of 16,544 full-time employees. The global coordinators and book running lead managers of the IPO are Morgan Stanley India Company, HDFC Bank, Credit Suisse Securities (India), CLSA India and Nomura Financial Advisory and Securities (India). The book running lead managers are Edelweiss Financial Services, Haitong Securities India, IDFC Bank, IIFL Holdings and UBS Securities India.

The insurer's solvency ratio as at March 31, 2015, March 31, 2016, March 31, 2017 and June 30, 2017 was 196.1%, 198.4%, 191.6% and 197.5%, respectively. IRDAI has prescribed a minimum 150% solvency ratio limit.The solvency ratio is derived out of the solvency margin (available solvency margin to required solvency margin) which denotes the amount by which the assets of the insurer exceed its liabilities. The insurer had a balance sheet with total net worth of Rs 4,150 crore.

The life insurer generated profit after tax of Rs 886.92 crore and delivered a return on equity of 25.6%, return on invested capital of 40.7% and operating return on embedded value of 21.7% during fiscal 2017. As at June 30, 2017, the firm had total assets under management (AUMs) of Rs 94,750 crore and Indian Embedded Value of  Rs 13,220 crore.