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Review By Dilip Davda on October 25, 2017
The New India Assurance Co. Ltd. (NIA) is the largest general insurance company in India in terms of net worth, domestic gross direct premium, profit after tax and number of branches as of and for the fiscal year ended March 31, 2017 (Source: CRISIL Report). Company has been in operation for almost a century. In Fiscal 2017, it had the largest market share of gross direct premium among general insurers in India (Source: CRISIL Report). As of March 31, 2017, NIA had issued 27.10 million policies across all product segments, the highest among all general insurance companies in India (Source: CRISIL Report). As of June 30, 2017, its operations were spread across 29 States and seven Union Territories in India and across 28 other countries globally through a number of international branches, agency offices and Subsidiaries including a desk at Lloyd’s, London.
NIA’s insurance products can be broadly categorized into the following product verticals: fire insurance; marine insurance, motor insurance, crop insurance, health insurance and other insurance products. In Fiscal 2013, 2014, 2015, 2016 and 2017, despite increasing competition from private players, it has maintained market leadership in the general insurance industry in India and were leaders in all segments except crop insurance (Source: CRISIL Report). In Fiscal 2017, company’s gross direct premium from fire, engineering, aviation, liability, marine, motor and health insurance represented a market share of 19.1%, 21.9%, 29.6%, 18.2%, 21.0%, 15.1% and 18.4%, respectively, of total gross direct premium in these segments in India, and were the market leader in each such product segment (Source: CRISIL Report).
NIA has developed an expansive multi-channel distribution network that includes individual and corporate agents, brokers, bancassurance partners and other intermediaries, as well as direct sales and sales through online channels. As of June 30, 2017, its distribution network in India included 68,389 individual agents and 16 corporate agents, bancassurance arrangements with 25 banks in India, and a large number of OEM and automotive dealer arrangements through agent and broker network. It has developed a pan-India branch network. As of June 30, 2017, NIA had 2,452 offices in India across 29 States and seven Union Territories.
Company’s net worth (excluding fair value change account) increased at a CAGR of 7.01% from Rs. 9605.03 crore as of March 31, 2013 to Rs. 12596.45 crore as of March 31, 2017 and was Rs. 13123.52 crore as of June 30, 2017, while its net worth (including fair value change account) increased at a CAGR of 9.26% from Rs. 25469.81 crore as of March 31, 2013 to Rs. 36298.09 crore as of March 31, 2017, and was Rs. 38283.60 crore as of June 30, 2017.
As of March 31, 2017 and as of June 30, 2017, it had an investment portfolio including cash and bank balances of Rs. 60056.41 crore and Rs. 63112.07 crore, respectively. NIA’s solvency ratio as of March 31, 2017 and as of June 30, 2017 was 2.22 and 2.27, respectively, compared to the IRDAI specified control level of 1.5. The book value of its investment portfolio increased at a CAGR of 11.84% from Rs. 23238.56 crore as of March 31, 2013 to Rs. 36354.77 crore as of March 31, 2017, and was Rs. 37952.00 crore as of June 30, 2017.
To part finance its future capital requirements and listing purpose, NIA is coming out with a maiden IPO of 120000000 equity shares of Rs. 5 each via book building route with a price band of Rs. 770-800 per share to mobilize Rs. 9240 – Rs. 9600 crore based on lower and upper price bands. Issue opens for subscription on 01.11.17 and will close on 03.11.17. Minimum application is to be made for 18 shares and in multiples thereon, thereafter. Issue consists of fresh equity issue of 24000000 shares and offer for sale of 96000000 shares. Post allotment, shares will be listed on BSE and NSE. NIA has reserved 3600000 equity shares for eligible employees. It is offering a discount of Rs. 30 per share to retail investors and employees. Issue constitutes 14.56% of the post issue paid up capital of the company. BRLMs to this issue are Kotak Mahindra Capital Co. Ltd., Axis Capital Ltd., IDFC Bank Ltd., Nomura Financial Advisory and Securities (India) Pvt. Ltd., Yes Securities (India) Ltd. Link Intime India Pvt. Ltd. is the registrar to the issue. Having issued initial equity at par, it issued bonus shares in the ratio of 1 for 1 in March 1976, 1 for 2.33 shares in May 1979, 2.045 shares for every 3 shares in December 1982, 4 for 10 in October 1986, 2.72 for 5 in November 1990, 3 for 2 in 2000, 1 for 2 in 2004, 1 for 3 in 2005 and 1 for 1 in August 2017. Post issue, its current paid up equity capital of Rs. 400 crore will stand enhanced to Rs. 412 crore.
On performance front, NIA has posted net profits of Rs. 1377.32 crore, Rs. 930.35 crore, Rs. 839.86 crore for Fiscal 2015, 2016 and 2017. It suffered decline in bottom lines due to higher out go on account of wage revisions and claims in health and motor segments. For Q1 of current fiscal, it has posted net profit of Rs. 513.35 with better product mix and revision in health and motor premiums. If we annualize latest earnings and attribute on fully diluted post issue equity then asking price is at a P/E of 32 plus. Issue is priced at a P/BV of 2.4. Thus issue appears justifiably priced against listed private sector peer ICICI Lombard which is quoting at a P/E of 47 plus. For last three fiscals, it has posted an average EPS of Rs. 12.32 and RoNW of 8.07 on an equity base of Rs. 200 crore. Although NIA has strong fundamentals compared to its peer, considering the fate of recently listed insurance sector IPOs, investors may shy away from this offer.
On BRLM’s front, 5 merchant bankers associated with the offer have handled 48 public offers in the past three years, out of which 12 offers closed below the offer price on listing date.
Conclusion: Risk savvy cash surplus investors may consider moderate Investment for long term (Other)
Review By Dilip Davda on October 25, 2017
DISCLAIMER: No financial information whatsoever published anywhere here should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is purely for educational and information purposes only and under no circumstances should be used for making investment decisions. Readers must consult a qualified financial advisor before making any actual investment decisions, based on the information published here. My reviews do not cover GMP market and operators game plans. Any reader taking decisions based on any information published here does so entirely at their own risk. Investors should bear in mind that any investment in stock markets is subject to unpredictable market-related risks. The above information is based on RHP and other documents available as of date coupled with market perception. The author has no plans to invest in this offer.
About Dilip Davda
Dilip Davda is veteran journalist associated with stock market since 1978. He is contributing to print and electronic media on stock markets/insurance/finance since 1985.
Dilip Davda is a leading reviewer of public issues and NCDs in the primary stock market in India. The knowledge he gained over 3 decades while working in the stock market and a strong relationship with popular lead managers makes his reviews unique. His detail fundamental and financial analysis of companies coming up with IPO helps investors in the primary stock market. Dilip Davda has a special interest in analyzing the SME companies and writing reviews about their public issues. His reviews are regularly published online and in news papers.
(Dilip Davda -SEBI registered Research Analyst-Mumbai,
Registration no. INH000003127 (Perpetual)
Email id: dilip_davda@rediffmail.com ).
The initial public offer (IPO) of The New India Assurance Company Limited offers an early investment opportunity in The New India Assurance Company Limited. A stock market investor can buy New India Assurance IPO shares by applying in IPO before The New India Assurance Company Limited shares get listed at the stock exchanges. An investor could invest in New India Assurance IPO for short term listing gain or a long term.
Read the New India Assurance IPO recommendations by the leading analyst and leading stock brokers.
New India Assurance IPO offers an opportunity to buy IPO shares before they get listed at the stock exchanges. Read the New India Assurance IPO Notes, Analysis and Recommendations by leading stock brokerage firms and experts in the above answer.
Our recommendation for New India Assurance IPO is to subscribe for long term.
As per the analysis by our lead analyst Mr. Dilip Davda, we suggest you to subscribe for long term to the New India Assurance IPO.
The New India Assurance IPO allotment status will be available on or around November 8, 2017. The allotted shares will be credited in demat account by November 10, 2017. Visit New India Assurance IPO allotment status to check.
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RHP
My questions are:
Do they plan for future business expansion? What would be the area of growth if any?
Why do the retailers generally fail to get allocation?