HDFC Life IPO opens today: From anchor investment to mkt share, all you should know

HDFC Standard Life Insurance, one of the top three private life insurers in profitability, will open its Rs 8,700-crore initial public offering (IPO) today and close it on Thursday. This will be the fourth IPO of an HDFC arm.

The HDFC Life IPO is an offer for sale (OFS), consisting of 191,246,050 equity shares by HDFC Life and up to 108,581,768 equity shares by UK-based Standard Life.

The price band of the IPO has been fixed at Rs 275 to Rs 290 per equity share. 

"The issue has been attractively priced for retail investors. I would say investors should not look for the first day pop and invest in the company with a long-term horizon for good returns,” said HDFC Life MD & CEO Amitabh Chaudhry in the company’s IPO roadshow in New Delhi on Wednesday. HDFC Life will get listed on stock exchanges on November 17. 

Here are key things to know about the company's IPO: 

1) Super demand from anchor investors

We have received superlative response from anchor investors, including a global investor who has never invested in the Indian IPO market or any Indian insurance IPO, informed Chaudhry. The company will share the details of anchor book investment on Monday. 

2) Open to acquisition of small, big players

Chaudhry also said the company is open to any kind of acquisition, including of Max Life if the "structural issues" that hampered its earlier deal are resolved.

"If the right kind of business comes along, we will definitely look at it. We are not saying that we will look to gobble up only small players. There could be some large players also which could come to the table," he said.

3) Business overview

The company's flexibility and ability to adapt to changes in the Indian life insurance industry has allowed business to grow and profitability to improve. During FY15-17, the total premium saw a CAGR of 14.5%, driven by a CAGR of 12.6%, 43.6% and 7.3% in individual New Business Premium (NBP), group NBP and renewal premiums, respectively. In addition, the company improved its Value of New business (VNB) margins from 18.5% in FY15 to 22% in FY17 by bettering cost efficiencies, increasing persistency ratios and selling a balanced product mix. 

4) Dividends 

The company paid dividends (including dividend distribution tax) totalling Rs 760 crore between the first in FY14 and FY17. Chaudhry informed the next dividend will be announced in December and the new shareholders of the company will be eligible to receive that. 

5) LIC losing market share?

In the presentation, Chaudhry noted that the private sector gained higher market share than LIC, for the first time in FY16, after regulatory changes in FY11. LIC's market share slipped below 44% during the first half of FY16 according to the Individual Weighted Received Premium (WRP), he said, quoting IRDAI and Life Insurance Council. 

Based on individual WRP, private sector had outpaced LIC in the last three years, he added. 

6) Key risks

i) Given the fact that each bank can now act as a non-exclusive corporate agent for up to three life insurers, three general insurers and three health insurers. Thus, the company’s bancassurance arrangement with HDFC Bank is no longer exclusive in nature, and the latter has entered into bancassurance arrangements with other life insurers. 

ii) The product pricing is based on assumptions and estimates for future claim payments and these assumptions are derived from historical experience, industry data and data from reinsurers. If actual claim payments are higher than expected, then the financial results from operations could be adversely affected.

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