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At 11:36 AM; the stock was trading at Rs 340 on the BSE and NSE, after hitting an intra-day high of Rs 369, up 27% against its issue price.
HDFCSL's Rs 8,695 crore initial public offer (IPO) was oversubscribed 4.9 times to its issue size. The issue got strong response from the qualified institutional buyers (QIBs), which saw 16.6 times more demand than shares on offer.
Barring the QIB portion, most other categories saw a lukewarm response. The retail portion was subscribed 94%. The high net worth individual (HNI) portion was subscribed 2.3 times, the stock exchange data shows. The issue is totally offer-for-sale (OFS), so the company will not receive any proceeds from the IPO.
Among the private life insurers, HDFCSL is one of the most profitable life insurers in India. The company has consistently been among the Top 3 private life insurers in terms of market share based on total new business premium (NBP) during FY15-17, according to CRISIL. Over the preceding two fiscals, its annualized premium equivalent (APE) registered a healthy CAGR of 14.5%.
From FY15, the operating performance has strengthened with significant expansion in value of new business (VNB) margin, sustained elevated operating return on embedded value (RoEV) and a strong EV CAGR of 18.4% over FY15-17. Key business drivers have been favourable trends in persistency ratios and product mix. The company has persistently delivered a high RoE.
Given impeccable brand equity, comprehensive suite of products, deeply penetrated bancassurance network, fast growing direct sales engine, strong financial position and an underinsured Indian market, HDFCSL is poised to grow fast and gain market share. Its profitability could expand further if the above mentioned business tailwinds continue. Thus, the franchise represents deep structural value, IIFL Wealth Management said in a note.
“On valuation front, HDFCSL is available at a P/IEV of 4.7x (to its FY17 IEV), which is aggressively priced as compared to the peers. Also considering the H1 FY18 Indian Embedded Value or IEV, the company is available at a P/IEV of 4.2x as compared to 3.4x of the peers. We are of the opinion that considering the revenue-mix, profitability, higher contribution of new business to the IEV and higher & trusted presence of HDFC brand in the domestic consumers, the premium valuation demanded by the company is justified,” analyst at Choice Broking said in an IPO update.