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ICICI Lombard IPO review (Apply)

Review By Dilip Davda on Sep 8, 2017

ICICI Lombard General Insurance Co. Ltd. (ILGI) is a general insurance arm of ICICI Bank group. The Bank is in the process of unlocking value of its arms via public issues and listings. Last year the group came with first life insurance sector arm ICICI Prudential Life Insurance IPO that after initial hiccups surged and continues to do well. Now it is coming out with a maiden offer for its general insurance arm which is ranking first among private sector general insurance companies with better product mix and having better business on all fronts.

ILGI is the largest private-sector non-life insurer in India based on gross direct premium income in fiscal 2017, a position it has maintained since fiscal 2004 after being one of the first few private-sector companies to commence operations in the sector in fiscal 2002. The company offers its customers a comprehensive and well-diversified range of products, including motor, health, crop/weather, fire, personal accident, marine, engineering and liability insurance, through multiple distribution channels. It was founded as a joint venture between ICICI Bank Limited, India’s largest private -sector bank in terms of consolidated total assets with and Fairfax Financial Holdings Limited, a Canadian based holding company which, through its subsidiaries, is engaged in property and casualty insurance and reinsurance
and investment management.

The Indian economy is one of the fastest growing large economies in the world, with its gross domestic product growing at a cumulative annual growth rate of 7.25% (in real terms) from fiscal 2013 to fiscal 2017, while the Indian non-life insurance industry, based on gross direct premium income, grew at a cumulative annual growth rate of 16.6% during the same period. The Indian non-life insurance industry was the 15th largest non-life insurance market in the world and the fourth largest in Asia in terms of gross direct premium income in the year ended December 31, 2016.

ILGI is coming out with its maiden IPO via secondary route through book building process. It is offering 86247187 equity share of Rs. 10 each in a price band of Rs. 651 to Rs. 661 to mobilize Rs. 5614.69 to Rs. 5700.94 crores (on the basis of lower and upper price bands). Issue opens for subscription on 15.09.17 and will close on 19.09.17. Minimum application is to be made for 22 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE and NSE. This being a secondary offer, its paid up capital post issue will remain same at Rs. 453.95 crore. The issue constituted 19% of fully diluted post issue paid up equity capital of the company. Issue has reservation of 4312359 equity shares for its retail and HUF stakeholders, from the balance 50% for QIBs, 15% for HNIs and 35% for retail category. GCBRLMs to this offer are BofA Merrill Lynch (i.e. DSL Merrill Lynch Ltd.), ICICI Securities Ltd. and IIFL Holdings Ltd., while BRLMs are Citic CLSA Securities (i.e. CLSA India Pvt. Ltd.), Edelweiss Financial Services Ltd. and JM Financial Institutional Securities Ltd. Karvy Computershare Pvt. Ltd. is the registrar to the issue.

On performance front, ILGI has posted total revenues/net profits of Rs. 5028.41 cr. / Rs. 520.07 cr. (FY14), Rs. 5044.81 cr. / Rs. 585.32 cr. (FY15), Rs. 5804.25 cr. / Rs. 505.34 cr. (FY16) and Rs. 7180.49 cr. / Rs. 641.82 cr. (FY17). For first quarter ended on 30.06.17 of the current fiscal, it has earned net profits of Rs. 214.34 crore on total revenues of Rs. 1881.88 crore. If we annualize latest working and attribute it on post issue equity then asking price is at a P/E of around 35 and at a P/BV of 7.6. Last three fiscal’s average RoNW is 18.42%. It has no listed peers to compare with. Average cost of acquisition by ICICI Bank and FAL, the selling stakeholders is Rs. 43.62 and Rs. 137.97 per share respectively.

On BRLMs front, 6 merchant bankers associated with the offer have handled 42 public issues in the past three years out of which 11 issues closed below the issue price on the listing date.

Conclusion: ILGI is set to gain first mover fancy in the sector post listing as many more companies in this segment are lining up for maiden offers going forward. Issue appears to be fully priced. Future for this segment is bright. Considering all these aspects, investment for long term may be considered.


Conclusion / Investment Strategy

ILGI is set to gain first mover fancy in the sector post listing as many more companies in this segment are lining up for maiden offers going forward. Issue appears to be fully priced. Future for this segment is bright. Considering all these aspects, investment for long term may be considered.

Reviewer recommends Subscribing to the issue.

Review By Dilip Davda on Sep 8, 2017

Review Author

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 information published here. Any reader taking decisions based on any information published here does so entirely at its 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.

(SEBI registered Research Analyst-Mumbai).


About Dilip Davda

Dilip Davda, a freelance journalist

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.

Email: dilip_davda@rediffmail.com

ICICI Lombard IPO FAQs

  1. 1. Why ICICI Lombard IPO?

    The initial public offer (IPO) of ICICI Lombard General Insurance Company Ltd offers an early investment opportunity in ICICI Lombard General Insurance Company Ltd. A stock market investor can buy ICICI Lombard IPO shares by applying in IPO before ICICI Lombard General Insurance Company Ltd shares get listed at the stock exchanges. An investor could invest in ICICI Lombard IPO for short term listing gain or a long term.

  2. 2. How is ICICI Lombard IPO?

    Read the ICICI Lombard IPO recommendations by the leading analyst and leading stock brokers.

  3. 3. ICICI Lombard IPO what should investors do?

    ICICI Lombard IPO offers an opportunity to buy IPO shares before they get listed at the stock exchanges. Read the ICICI Lombard IPO Notes, Analysis and Recommendations by leading stock brokerage firms and experts in the above answer.

  4. 4. Is ICICI Lombard IPO good?

    Our recommendation for ICICI Lombard IPO is to subscribe.

  5. 5. Is ICICI Lombard IPO worth Investing?

    As per the analysis by our lead analyst Mr. Dilip Davda, we suggest you to subscribe to the ICICI Lombard IPO.

  6. 6. When will ICICI Lombard IPO allotment status?

    The ICICI Lombard IPO allotment status will be available on or around Sep 22, 2017. The allotted shares will be credited in demat account by Sep 26, 2017. Visit ICICI Lombard IPO allotment status to check.

  7. 7. When will ICICI Lombard IPO list?

    The ICICI Lombard IPO will list on Wednesday, September 27, 2017, at BSE, NSE.

2 Comments

2. som deo  Sep 18, 2017 2:57:30 PM
To my opinion one should take a considered view on this issue keeping in mind the higher valuation in the light of a very high operating ratio.One thing I would like to know as how come the Warburg Pincus is given the shares at such low price. Expecting, however,the situation as was the case of ICICI Pru .
1. PRAMOD HARLALKA  Sep 15, 2017 6:33:24 PM
CAN APPLY ICICI LOMBARD PLEASE REPLY