ICICI Lombard, the largest private general insurer in the country, has begun groundwork for its initial public offering (IPO), in what may well be the first public offering by a private general insurer.
The insurer has begun preliminary discussions with investment bankers and is aiming to hit the market in the second half of this financial year, said two people familiar with the matter. The issue is expected to be anywhere between Rs 3,000 and Rs 4,500 crore.
ICICI Lombard is a joint venture between ICICI Bank and Canada-based Fairfax Financial Holdings. The IPO will help shareholders to monetise their holdings and help Fairfax, which currently holds 35 per cent in the joint venture, to divest its stake.
ICICI Lombard has an overall market share of 8.4 per cent in the general insurance space, and is a major player in the vehicle, home, travel and health space. The firm has 19,800 agents/brokers.
Interestingly, Fairfax has got a preliminary conditional nod from regulator Insurance Regulatory and Development Authority of India (Irdai) for a new non-life venture with another partner.
It is reportedly looking to part-sell its stake to another buyer. As per regulatory requirements, Fairfax will have to bring down its holding to 10 per cent in ICICI Lombard.
Any such stake sale could have an indirect bearing on the valuations of ICICI Lombard. ICICI Lombard was valued at Rs 17,000-19,000 crore as per recent brokerage reports, and a dilution of 25 per cent would fetch the insurer around Rs 4,500 crore. A 15 per cent dilution would fetch about Rs 3,000 crore.
Apart from the direct stake sale, the public offering will allow Fairfax to further bring down its stake if it wants to through an offer for sale. Foreign investors can hold up to 49 per cent in Indian insurers.
Emails sent to ICICI Bank and Fairfax did not get a response.
ICICI Lombard saw a 38 per cent rise in net profit for financial year 2016-17 to Rs 701.9 crore from Rs 507.5 crore in the previous year. It collected a gross domestic premium income of higher than Rs 10,000 crore for 2016-17.
The growth rate of the non-life insurance sector which had slowed between 2012 and 2015 has now turned around due to a pick-up in economic activity. In 2015-16, the general insurance sector posted a growth of 13.8 per cent and underwrote direct premiums worth Rs 96,379 crore, according to General Insurance Council data.
In terms of policies issued, 57.5 million policies were issued in 2015-16 by private sector insurers compared with 68.9 million issued by public sector insurers. Private sector general insurers handled 6.4 million claims compared with 22.5 handled by public sector insurers.
ICICI Prudential Life Insurance had successfully gone public in September last year, with an issue size of about Rs 6,000 crore, and the offering getting oversubscribed by more than 10 times.
In January this year, the government cleared dilution of 25 per cent stake in five state-run general insurers — New India Assurance Company, United India Insurance, National Insurance Company and Oriental Insurance Company besides reinsurer General Insurance Corporation of India.