Analysts say companies in this space are a play on higher penetration of insurance products amid rising share of financial assets in household savings. Insurance in India is deeply under-penetrated currently. But, these benefits will only accrue in the long term, they warn.
“Given the mature valuations, investors can subscribe to the issue from a long-term perspective. It must be noted that since the issue is being offered at expensive valuation, it may not attract major listing gains,” said Centrum in an IPO note on the company.
HDFC Life had set the price band for IPO at Rs 275-290 per share. At the top end, the company is valued at 4.2 times its embedded value as of September. In comparison, listed peers ICICI Prudential and SBI Life are valued at 3.2 times and 3.6 times, respectively. At the top end, HDFC Standard will have a market cap of Rs 61,400 crore.
“We believe slight premium is justifiable, considering, consistent growth across premium categories, improving dividend payout over last four years, strong parentage, trusted brand name, highest value of new business margin (22 per cent for FY17) and well-balanced business mix,” said a note by Angel Broking.
At the top end, HDFC Standard will have a market cap of Rs 61,400 crore.
HDFC Life was established in the year 2000 as a joint venture between the country’s leading mortgage loan provider HDFC and UK-based Standard Life. HDFC Life’s IPO was entirely an offer for sale, where HDFC and Standard Life sold shares worth Rs 5,540 crore and Rs 3,160 crore, respectively.
Prior to the IPO, HDFC held 61.21 per cent and Standard Life Mauritius 34.75 per cent in the company, which will now fall to 51.7 per cent and 29.3 per cent, respectively.