New India Assurance IPO review (Others)

Review By Dilip Davda on Oct 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)


Conclusion / Investment Strategy

Risk savvy cash surplus investors may consider moderate Investment for long term (Other)

Review By Dilip Davda on Oct 25, 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

New India Assurance IPO FAQs

  1. 1. Why New India Assurance IPO?

    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.

  2. 2. How is New India Assurance IPO?

    Read the New India Assurance IPO recommendations by the leading analyst and leading stock brokers.

    • Dilip Davda - Apply at your own risk
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  3. 3. New India Assurance IPO what should investors do?

    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.

  4. 4. Is New India Assurance IPO good?

    Sorry, we didn't rate the New India Assurance IPO.

  5. 5. Is New India Assurance IPO worth Investing?

    Our lead analyst Mr. Dilip Davda didn't rate the New India Assurance IPO.

  6. 6. When will New India Assurance IPO allotment status?

    The New India Assurance IPO allotment status will be available on or around Nov 8, 2017. The allotted shares will be credited in demat account by Nov 10, 2017. Visit New India Assurance IPO allotment status to check.

  7. 7. When will New India Assurance IPO list?

    The New India Assurance IPO will list on Monday, November 13, 2017, at BSE, NSE.

5 Comments

Arathi K
5. Arathi K  Oct 31, 2017 14:02 I Like It. | Report Abuse Reply 0
Thank you Mr. Dilip Davda for the most required informative report. It appears from your report that the net profile has been declining from the past 3 to 4 years so they need surplus capital requirement for the future.

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?
Aryan Raj
4. Aryan Raj  Oct 28, 2017 21:45 I Like It. | Report Abuse Reply 0
Sir, is p/e 32 or as RHP reads on page 118, 75~ odd?
Dilip Davda
4.1. Dilip Davda  Oct 29, 2017 19:16 I Like It. | Report Abuse 0
I repeat my views """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 """. Thus you can see that RHP P/E is based on net profit of Rs. 839.86 for FY17 where as my P/E is based on annualized earnings of Rs.513.35 crore net profit for Q1. Hope this will meet your query.
Aryan Raj
4.2. Aryan Raj  Oct 30, 2017 19:25 I Like It. | Report Abuse 0
Thanks for valuable feedback. :)
Sunil Mudgal
3. Sunil Mudgal  Oct 26, 2017 17:13 I Like It. | Report Abuse Reply 0
Do you not believe that the only proper comparison would be ICICI Lombard, considering that the others are in life while GIC is a reinsurer. And if so, should an investor invest considering that there is an apple to apple comparable listed entity
Dilip Davda
3.2. Dilip Davda  Oct 27, 2017 12:15 I Like It. | Report Abuse 0
This message is meant for all our patrons
RAJAKUMAR
3.3. RAJAKUMAR  Oct 30, 2017 01:06 I Like It. | Report Abuse 0
Dilip Davda Sir.
Sir you mentioned NAV Rs.164 and Price to book value is 2.4 how it come. sir. Issue price is Rs.800 and NAV is 164 then it becomes 5 times of the price to book.
RAJAKUMAR
2. RAJAKUMAR  Oct 30, 2017 00:52 I Like It. | Report Abuse Reply 0
Dilip Davda Sir.
NAV at the time of IPO Rs.164.04 as you mentioned and also you mentioned price to book value is 2.4 Sir issue price is 800 then how it comes 2.4. Rs.800 divided by 164.04 comes almost nearly 5 times of the book value.
Bonga Halu
1. Bonga Halu  Oct 27, 2017 13:40 I Like It. | Report Abuse Reply 0
Very good analysis, Dilip ji. You are spot on. NIA is a gem. The qs. is why do the retail investors fail to get any allocation?








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