HDFC Standard Life Insurance will shortly become the third life insurer after ICICI Prudential Life Insurance Company and SBI Life Insurance Company to get listed on the bourses.
The company’s IPO is an offer for sale (OFS), consisting of 191,246,050 equity shares by HDFC and up to 108,581,768 equity shares by Standard Life Mauritius.
Post-IPO, HDFC’s shareholding in the life insurer will come down by 9.55 percentage points to 51.86 per cent and that of Standard Life will decline by 5.42 percentage points to 29.44 per cent.
The price band of the IPO, which opens on November 7 and closes on November 9, has been fixed from ₹275 to ₹290 per equity share. The proceeds (aggregating up to about ₹8,700 crore) of the OFS will accrue to the two promoters.
Deepak Parekh, Non-Executive Chairman, said though the life insurer doesn’t need money as it has a robust solvency ratio, it is still keen on a listing as “we have always believed it is good to have a listed company.”
In an interview to BusinessLine, he spoke about growth opportunities in the insurance space, consolidation and the company’s IPO plans. Excerpts:
What is your outlook for the life insurance sector and your company?
We feel that growth in the (life) insurance sector is going to be good because penetration levels (insurance penetration as a percentage of GDP) are very low (in India at about 2.7 per cent in 2016). They are half global standards...
And India is growing well. It is one of the fastest growing large emerging economies. So, we are quite hopeful on that.
The parentage of HDFC and Standard Life, of course, is there. We have developed the company in the way we developed HDFC over four decades.
Initially, we sent two of our senior-most people to the life company to lay the foundations of similar culture, similar standards, similar governance, transparency, and ethos.
So, it (HDFC Standard Life) is a sort of twin HDFC, I would say. And Standard Life was very helpful in setting up the company as it had massive insurance experience.
So, we are keen to do this (IPO). HDFC Standard Life is an independent organisation, run independently by its management team. We (HDFC) sit on the board but it (the company) is empowered and has its own management cadre and good people at the senior management level.
We have full confidence in the management team that our name will not get spoilt. We have to protect our brand. So, if we give them our brand, we have to ensure that it is protected.
What are the objects of the issue?
It is an OFS (the company will not receive any proceeds since the issue is being made through an ‘offer for sale’ by the selling shareholders).
The company doesn’t need capital. Since 2012, I think, the company has not needed any capital. And our solvency ratio is about 200 per cent (above the minimum 150 per cent required under IRDAI regulations).
So, the company doesn’t need more capital in the foreseeable future. Capital will only be needed if we want to acquire something afterwards.
And, as my colleague, the chairman of Standard Life put it (in one of the newspapers), we have nurtured the child (HDFC Standard Life) since birth, it has matured now, it has to go out and find a new home. And so we have done enough fathering and mothering of the child.
And basically we have always believed it is good to have a listed company …So, since we have always listed (companies within the group), we don’t have any family or anything running them….we let each company be professionally run.
What are your thoughts on consolidation in the life insurance sector?
There are far too many life insurance companies and some of them are growing very slowly — garnering ₹100-200 crore premium a year.
You can’t survive with the costs. There will be opportunities. There will be consolidation in the financial sector, and insurance is definitely one.
What is your pitch to investors?
The numbers speak for themselves — return on equity of 26.8 per cent, no immediate need for capital (so no question of dilution), new business growth is double the market growth, margins are the best in the industry… So, it makes logical sense to get good value for it.
But we are aware that there is a little fatigue in the market because two or three insurance companies have come out with their IPOs.
So, we have priced it in such a way that it is attractive to investors.
Any plans to revive the merger with Max Life?
That is closed. They have to make up their mind because they need permission from the regulator. They did not get permission. That is why it was closed.