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Analysts are gung-ho about ICICI Prudential Life Insurance Company IPO which opens for subscription on September 19 and closes on September 21. The Rs 6057-crore public issue is avialable for subscription at Rs 300-334 per share for its 18.13 crore equity shares initial public offer (representing 12.63% of the post-offer paid-up equity share capital). It is the largest private sector life insurer by total premium and assets under management in FY16. Recommending to subscribe, Centrum Wealth says that ICICI Pru's valuations appear attractive when compared to 4.1 times of Max Financial Services’ embedded value.
It believes ICICI Pru will be able to attract adequate investor interest considering the healthy financials, return ratios of over 30% return on equity (RoE) and one of the highest solvency ratio of 320%. "The company’s operational strategies and focus on digital sales are expected to aid business growth going ahead. Hence, investors can subscribe to the issue," it says in a note. However, it points out that ICICI Pru’s key risks include higher competition affecting business growth; any termination adverse change in relationships with/performance of bancassurance partners may affect business and financial condition and changes in the regulatory environment.
Geojit BNP Paribas also suggests subscribing the issue with a view that untapped opportunity and penetration in life insurance provides ample scope for the company to grow its portfolio at a rapid pace. "At the upper price band of Rs 334 per share, the IPO is priced at 3.4x FY16 P/EV which is favourable as compared to the valuation of recent insurance deal between HDFC Life and Max Life. The transaction valued HDFC Life at 4.5x FY16 P/EV and Max Life at 3.7x. Hence, we believe that valuation is reasonable," BNP Paribas states.
NVS Wealth Manager is confident that the insurer will deliver consistent performance and provides an excellent investment opportunity for investors with a long term horizon. “At the higher band price of Rs.334 per share, the IPO is priced at a PE multiple of 29x which compares very favourably with its peers in the listed(Max Financial P/E-64x) and non-listed (HDFC Std Life P/E-31x) space. At the price band of Rs.300-334 the price to Embedded value (P/EV) is 3.1 to 3.4 and considering the likely increased earnings based on current financial year 2017 as well as addition to the Net worth and increased Book value, the pricing could become much more attractive,” it adds.
Impressed by the company's performance, Hem Securities also advises to subscribe it. It says looking at ICICI Pru's strong fundamentals, established & well known brand & strong parentage, it is looking attractive destination to deploy the funds in. Investors are recommended to invest to ride the long term growth story of Insurance Penetration in India, says Sushil Finance. It is impressed by its consistent leadership across cycles, diversified multi-channel distribution network, leveraging technology, robust and sustainable business model, strong brand and experienced senior management team.
Ajcon also advises to subscribe to the issue expecting a potential upside to the issue price at the upper end. "The share swap agreement of the recent proposed merger of Max life with HDFC life has price/embedded value multiple of 4.2x for a market share of 7.6% as against ICICI Prudential Life Price/Embedded value multiple of 3.4x with market share of 11.3% in overall market," it adds.
Agrees Anand Rathi that the IPO offers a good investment opportunity in a sector that is opening up for retail participation. Not only that, the brokerage firm is impressed by its ICICI Pru's strong brand, leadership among the private life insurance players, and cost efficiency which makes the issue attractive even though it demands premium valuation. It has a subscribe recommendation.
